$28 billion health fund backed by Bill Gates and Bono is investigated for fraud

A multi billion dollar global health fund backed by the Bill and Melinda Gates Foundation is being probed for widespread fraud after it emerged grant money to developing countries had been 'eaten up by corruption.'

The Global Fund to Fight Aids, Tuberculosis and Malaria (GFATM), which distributes $28 billion in aid, found that two-thirds of the money from some grants had been stolen or misused by recipient countries.

As a result of the internal investigation, donor countries Germany and Sweden have withheld over $250 million in aid money from the Global Fund on the back of the claims.

The Fund's newly reinforced inspector general's office, which uncovered the corruption, can't give an overall figure on the size of the fraud because it has examined only a tiny fraction of the $10 billion that the fund has spent since its creation in 2002.

To date, the United States, the European Union and other major donors have pledged $21.7 billion to the fund, the dominant financier of efforts to fight the three diseases.

The Global Fund receives money from 54 countries and charitable foundations such as (Product) Red, which is supported by rock star Bono.

Other prominent backers of the Fund include former U.N. secretary-general Kofi Annan, French first lady Carla Bruni-Sarkozy and Microsoft founder Bill Gates, whose Bill and Melinda Gates Foundation gives $150 million a year.

The controversy over the misuse of Fund health money erupted after a report from the Fund’s inspector-general found that 'as much as two-thirds' of some health grants to developing countries had been 'eaten up by corruption.'

Reports specifically named projects in Djibouti, Mali, Mauritania and Zambia, and cited forged or non-existent receipts for 'training events,' fake travel and housing claims and outright theft, along with shoddy bookkeeping.

A full 67 percent of money spent on an anti-AIDS program in Mauritania was misspent, the investigators told the Fund's board of directors.

It also emerged that 36 percent of the money spent on a program in Mali to fight tuberculosis and malaria, and 30 percent of grants to Djibouti were similarly misappropriated.

In Zambia, where $3.5 million in spending was undocumented and one accountant pilfered $104,130, the fund decided the nation's health ministry simply couldn't manage the grants and put the United Nations in charge of them.

The fund is trying to recover $7 million in 'unsupported and ineligible costs' from the ministry.

Despite the reports of widespread corruption, Fund executives said the amount involved was only a pittance compared to some $13 billion in spending so far.

The Fund's Inspector General John Parsons declared that: 'The distinguishing feature of the Global Fund is that it is very open when it uncovers corruption.'

The Fund's Executive Director Michel Kazatchkine also hit back at critics, defending safeguards on how money distributed is spent.

In a statement he said: 'Concerned by the alarmist media stories, some donors to the Global Fund have stated that they need to reassure themselves of the organisation’s procedures for dealing with fraud before affirming their contributions.

'We will work with these donors – as well as anyone else – to ensure that the Global Fund’s systems are as good as they possibly can address corruption.

'To date, the Global Fund’s Office of the Inspector General has undertaken audits or investigations in 33 of the 145 countries where the Global Fund has grants.

'As a result of this, the total amount of misappropriated or unsubstantiated funds that the Global Fund is demanding to be returned at present is $34 million.'

Sweden, the fund's 11th-biggest contributor, has suspended its $85 million annual donation until the fund's problems are fixed. It held talks with fund officials in Stockholm last week.

Swedish Foreign Ministry spokesman Peter Larsson said in a statement that his country is concerned about 'extensive examples of irregularities and corruption that the fund has uncovered' in nations like Mali and Mauritania.

'For Sweden, the issues of greatest importance are risk management, combating corruption and ultimately ensuring that the funds managed by the Global Fund really do contribute to improved health,' he said.

The investigative arm of the U.S. Congress also has issued reports criticising the Fund's ability to police itself and its over reliance on grant recipients to assess their own performance.