Wednesday, August 24, 2005

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The Global Fund depresses me on Uganda

For many of the blights that bedevil sub-Saharan Africa -- AIDS, poverty, corruption -- Uganda has been considered an exception. However, Sebastian Mallaby's The World's Banker implied that much of this success would not necessarily be self-sustaining.

It's with that in mind that I was saddened but not surprised to see this Alan Beattie story in the Financial Times:

The Geneva-based Global Fund to Fight Aids, Tuberculosis and Malaria has suspended its grants to Uganda, a pioneer of Aids treatment, after an investigation uncovered evidenceof “serious mismanagement” of funds.

The investigation by the organisation's “local fund agent” (LFA), the business services firm PwC, found a string of problems with the grants, the FT was told.

The fund has disbursed about $45m (€37m, £25m) to Uganda over several years.

The report found that when dollar grants were converted into Ugandan shillings, discrepancies between the exchange rate reported and actual market exchange rates meant that there was a shortfall of some $280,000....

Uganda, one of the aid darlings of Africa in the recent past, has been praised for its efforts in tackling Aids. The Global Fund said that, in spite of the report, Uganda's programmes had successfully treated thousands of sufferers, and said it would try to ensure that such programmes were not disrupted. It also defended its central role in the global fight against Aids. But Uganda has come under increasing criticism for the continued perceived prevalence of corruption, as measured by surveys such as that of the campaign, Transparency International. Some officials and campaigners are raising questions about giving debt relief and aid without strict conditions on use.

You can read this Global Fund press release, as well as this additional Q&A, which cites "inappropriate, unexplained or improperly documented" expenses.

posted by Dan on 08.24.05 at 03:22 PM


Maybe I've been in Chicago too long, but these figures don't even begin to depress me, Dan.

$280K out of $45 million? As a percentage that's way behind what the scammeisters under Daly have gotten away with. And (I can't believe I'm SAYING this...) even with the corruption endemic here--or perhaps because it IS endemic--I can honestly say I waver on whether "da bum" should be thrown out next time around. Maybe, as grown-ups, we need to let slide some small percentage of outlay--what's the magic number? certainly under 10%, maybe 5--so long as MOST of the money goes where it's supposed to.

I'm reminded of some great advice I got before going to India some years back for dissertation research. Hire a servant because you can afford it, because someone needs the money, and because there's no other way to get ANY work done. And have him/her do your shopping because they won't get ripped off nearly as much as YOU would in the market and because it gives the servant a chance to skim a bit off the top with no one the wiser. Don't look too closely at expenses (easy enough, given the utter absence of receipts) and everyone makes out okay.

It was good advice then and it's still good advice. A couple of percent off the top is not worth jeopardizing all that Uganda has achieved in the past decade. I'm serious.

posted by: Kelli on 08.24.05 at 03:22 PM [permalink]

I understand Kelli's point, but it doesn't sound like the $280,000 is quite the whole story. And, in fairness to the Global Fund, it has to operate in other countries besides Uganda. Its leadership may feel tolerance for a little corruption there now will encourage its other clients to attempt greater corruption later.

posted by: Zathras on 08.24.05 at 03:22 PM [permalink]

I have to agree 280 k USD is trivial, unclear if there is more of course. Would not be surprised if there was - large amounts of other people's money passing through any system creates incentives to skim.

Not depressing, merely a warning that even under a relatively decent administration (ceteris paribus) one has to be realistic that graft, skimming will crop up and require action. Idealisation is an error.

I should note, however, that mere irregularities are not necessarily graft. As I do business in emerging markets, I can personally attest having proper documentation on a lot of things is not simple to achieve (some vendors are likely tax evading, refuse to submit proper bills, etc. One can not cure such issues easily).

posted by: Lounsbury on 08.24.05 at 03:22 PM [permalink]

On reading Kelli's comments I see she was making the same point as I, only I see it also on the business level.

The marginal benefit for squeezing that last tiny bit of "greasing the wheels" of the system in a system that requires a little bit of extra grease may very well not be worth it.

posted by: Lounsbury on 08.24.05 at 03:22 PM [permalink]

It's hard to tell from the press release and the Q & Asexactly what the problem was. There were probably insufficient financial controls in place to determine exactly how much was spent on the charitable purposes and necessary expenses, and how much was skimmed. $280,000 is likely the number they could prove, and there is a much higher number for which there is inadequate accounting.

Much accounting is really the review of financial books prepared by the entity being audited. It is not the reconstruction of books. As with MCI and Enron, the auditor is unlikely to know the full scope of the problem without a nitty gritty forensic audit. he just can see that there are some icebergs floating around out there.

Think UN oil for food, Kelli. The amounts being talked about by the UN are really rather small. But there seems to be a bigger problem out there that wuld not be seen in a typical audit.

posted by: Appalled Moderate on 08.24.05 at 03:22 PM [permalink]

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