Sunday, June 29, 2014

'World Bank Health Programme: Audit finds $70m spending irregularities'

For those unable to access the New Age article on the website relating to financial irregularities in donor supported health program me, it is set out below.

               (b) Access the Audit report and other documents

[To see second article in the series: World Bank health program - $428m of irregularities in 8 years]



Audit finds $70m spending irregularities

David Bergman
In just one year, health ministry officials have misused at least $70 million of funds provided for a major development programme primarily financed by the World Bank and the governments of Britain, Canada, Sweden and the United States, according to an official audit report.
The audit of the Health Population and Nutrition Sector Development Programme found that between July 2012 and June 2013, $69.8 million (Tk 542.9 crore ) was spent either on irregular procurements, unverifiable expenditure, or on medicine and equipment which was excess of requirement.
The audit, seen by New Age, refers to ‘collusive’ tendering, ‘fictitious’ documents, ‘fraudulent practices,’ ‘misappropriated’ money, ‘useless’ purchases, ‘misuse’ of money, ‘lack of financial propriety’ ‘violation of fundamental accounting practices’ and inability of officials ‘to justify the genuineness of payments’.
The identified financial irregularities represent over 20 per cent of the total $321 million (Tk 2,498 crore) which the programme spent that year but since $102 million (Tk 796 crore) of the expenditure was not scrutinised in the audit, it reflects as much as one third of the amount of expenditure that was audited.
‘The audit is a tip of an iceberg,’ one senior auditor told New Age.
Md Neazuddin Miah, the secretary to the ministry of health and family welfare, accepted that there were many audit observations, but claimed that many ‘are very minor in nature.’
He said that the audit for 2012-2013 was ‘not finalised as we have asked the officers concerned to answer why they have made such irregularities’. He added that the ministry was waiting for a response from the audit office about the explanations ‘before taking necessary action against the line directors’.
According to the audit report, in 2012-2013, the project was financed by $220 million (Tk1,710 crore) from international donors with the remaining $101 million provided by the government of Bangladesh.
The audit was undertaken for the World Bank by the Foreign Aided Project Audit Directorate, which is part of the government-run Office of the Comptroller and Auditor General. The World Bank not only loaned $359 million (Tk 2,791 crore) for the five-year programme but also was given fiduciary oversight of how most of the international donor money given to the programme was spent.
New Age obtained a copy of the audit relating to the programme following a request to the World Bank under its access to information policy. World Bank considers the Comptroller and Auditor General, as the ‘independent auditor for all Bank projects’.
The audit report for the year 2012-2013, which was sent by FAPAD to the World Bank in December 2013, sets out 99 different audit ‘observations’ of which 33 were categorised as particularly serious. It is not stated how much of the $70 million relates to donor as opposed to Bangladesh government money.
An analysis by New Age of the audit observations found that improper procurement of goods, amounting to $29 million (Tk 224 crore), was the biggest contributor to the total amount of financial irregularities.
The audit detailed 25 apparently unlawful procurements involving contracts worth as much as Tk 132 crore ($17 million).  In one contract involving the expenditure of Tk 99 lakh ($129,000), the audit found strong evidence of ‘collusive practice’ between the ministry officials and the supplier.
The audit also identified $18 million (Tk 139 crore) in spending where there were no documents to support the legitimacy of programme payments. One example involves $6 million (Tk 46 crore) which was supposedly spent on training but where there were no ‘basic records or documents’ to support the claim, and another $1.7 million (Tk 13 crore) which was supposed to have been spent on foreign training but which the auditors said was only justified by ‘fictitious’ vouchers.
‘Unauthorised’ expenditure amounted to $12.1 million (Tk 94 crore) , and excess or ‘useless’ spending added up to a further $6.8 million (Tk 52 crore) – with the auditors giving examples of  the purchase of $1.5 million (Tk 13 crore) worth of vitamins, and $924,000 (Tk 72 crore) of hospital equipment which were not required.
In addition, $4.3 million (Tk 3.5 crore) had been spent on goods that were not received or, if they were, did not function properly.
The audit for 2012-2013 was no aberration. The previous year’s audit for 2011-2012, the first year of the programme, identified that $21 million (Tk169 crore) of the spending – just short of 10 per cent of that year’s total expenditure – was irregular.
In that audit, irregularities included $2.4 million (Tk 20 crore) given to suppliers although no goods were received, $1.3 million (Tk11 crore) supposedly spent on training sessions though there was no supporting authorisation or documentation, and $215,000 (Tk2 crore) spent on buying materials without any open tender.
The secretary to the ministry told New Age that in relation to the 2011-2012 audit, three or four ministry officers had given back about Tk 2 crore to government accounts, and that departmental action was being taken against them.
Internal donor documents show that before agreeing in 2011 to commit money to the five- year health programme, the donors recognised that there were significant financial risks involved.
An appraisal document written that year by the World Bank stated that the financial risks were ‘substantial’.
And the UK government also stated that the project’s fiduciary risk was ‘high.’
However, both reports went on to state that they considered sufficient safeguards were in place to minimise the risks.
In a statement to New Age, the World Bank stated, ‘The program is subject to annual audits and any allegations, or suspicions, of fraud and corruption have been shared with the program’s other donors and the Bank’s Integrity Vice Presidency.’
‘With respect to the fiscal year 2013 audit report, the World Bank fiduciary team is currently engaged in the due diligence process with the Ministry regarding observations made in that report.’
In an earlier meeting with New Age, the World Bank played down the significance of the 2012-2013 audit claiming that only 22 out of the 99 audit observations, amounting ‘to about $10 million’, was ‘serious from the World Bank’s perspective’.
The Bank declined to provide any details of which particular audit ‘observations’ the Bank considered were ‘serious’, and the details of why it did not consider the audit’s other 71 observations to be significant.
The $3.1 billion five-year Health Population and Nutrition Sector Development Programme, which started in 2011, is implemented by the ministry of health through 32 separate line directors.
The World Bank and international donors have committed to providing the ministry $2.16 billion over the period, two thirds of the total cost, with the Bangladesh government responsible for the remaining $1.17 billion.
Other than the World Bank, the programme’s main contributors are the United States government which is committed to giving $450 million, the UK government which will provide $191 million, the Canadian government which will give $102 million, the Swiss government is committed to providing $80 million and the German government $31 million.
Most of this donor money is pooled together and the World Bank has been given responsibility for the fiduciary oversight of its use in the programme.
In addition to the pooled money, there are a number of other donors, including the Japanese government, UNICEF, the European Union and other UN bodies, who give money directly to the ministry of health for use in the programme. This direct project aid, which in 2012-2013 amounted to $60 million was not audited by FAPAD, and the World Bank has no fiduciary responsibilities relating to its use.
The World Bank requires that FAPAD completes its annual audit of the programme’s activities within six months of the end of each financial year.
The $70 million of financial irregularities in the 2012-2013 audit do not include a further $3.7 million of irregularities which are ‘non-expenditure’ related – that is to say, involve ministry officials’ failure to collect tax from contractors, or their failure to transfer money from one account to another, as government rules require.
The audit report stated that it had only audited 70 per cent of the total $321 million expenditure, leaving about $100 million unaudited.

1 comment:

  1. If the published article is true, then proper inquiry should be undertaken and the guilty parties should be brought to justice. If we allow these irregularities to continue then Bangladesh will never have a national health network. This is an issue of particular concern and govt. should not take it leniently.