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Three major Nigerian Non-Governmental Organisations indicted for misappropriating donor funds

General Yakubu Gowon, Nigeria’s former military head of state, is bound to be shocked at the findings of a recent audit investigation on the management of grants given to the Yakubu Gowon Centre, YGC, a Non-Governmental Organisation, NGO, established in his honour in 2002. 

The YGC is among seven organisations in Nigeria variously investigated by the Global Fund, GF, an agency of the United Nations, for  alleged mismanagement of money which they received as grant in aid of the global fight against HIV/AIDS, Tuberculosis and Malaria in Nigeria. The other NGOs which benefited from the GF grants are the National Action Agency for the Control of AIDS in Nigeria, NACA, the Christian Health Association of Nigeria, CHAN. Society for Family Health, SFH; National Malaria Control Programme, NMCP; Association for Reproductive and Family Health, ARFH, and CHAN-MEDIPHARM.

Out of the lot, the YGC, NACA and CHAN were singled out as worst managers of the GF funds, as a result of special illegal transactions they carried out. On account of the gravity of their offences, the GF has demanded a refund of about $7.3million from  them. YGC and CHAN were also barred from receiving GF grants in future.

The Global Fund to fight Aids, Tuberculosis and Malaria is a United Nations’ agency that provides money as grant to NGOs and organisations involved in the global war against diseases. The  money the GF spends comes from donors.  Nigeria is a donor and is reported to have so far redeemed $20 million out of a commitment of $30 million it made to the global body.

Details of the offence of each of the organisations are contained in a report of  an audit investigation  carried out by the Office of Inspector General, OIG, an arm of the GF, made public in October last year. The report also contains details about amounts given to each of the organisations out of a total sum of US$ 474,519,260, (about N75.5 billion) which the UN agency claimed it gave out, between 2003 and 2009, as grant to fight against HIV/AIDS, Tuberculosis and Malaria in Nigeria.

In the report, the GF expressed its dissatisfaction in the way and manner the grants were managed. Simon Bland, chairman of the GF board, said in his cover note to the investigation report that what the organisations in Nigeria did “represents activities that are poorly accounted for, were not budgeted in the work plan…or fall within the Global Funds current definition of ineligible expense.”

Of all the NGOs, the Yakubu Gowon Centre was found to be  most brazen in  acts of fund mismanagement.  The report indicated that as at 2011, the YGC received four grants, totalling US $145,120.199 million for procurement and distribution of Malaria drugs to various states within the Federal Republic of Nigeria. Rather than carry out its programme as specified in the contract it signed with the fund donor, the centre was reported to have proceeded to expend large chunks of the money in activities that were suspicious and objectionable to the fund providers.

The OIG reported, for instance, that between 2005 and 2009, YGC conducted at least 61 currency exchange transactions, exchanging approximately US$ 22 million of the grant in disbursements with 35 different companies and four individuals. The OIG claimed that, “by conducting these transactions, YGC exposed the Global Fund to the risk that grant funds would be delivered to prohibited parties and used for illicit purposes, a loss of grant funds and the unjust enrichment of YGC from diverting some of the exchange proceeds.”

The OIG further explained that, in particular, YGC segregated a portion of the returned funds in Nigerian Naira and delivered them to a separate entity and account, which were then not repatriated to Global Fund dedicated accounts, or used for programme purposes. As a result of the practice, at least US$ 824,626 of Global Fund monies were said to have been lost, as the funds were not returned to YGC’s Global Fund-dedicated bank accounts and used for programme purposes.

The OIG said it was able to identify direct evidence that YGC diverted at least N3,878,013 (US$ 29,260) to separate uses. It added that “the transactions identified by the OIG auditors and examined by the OIG Investigations Unit also exposed Global Fund monies to the acute risk of association with money laundering and other serious criminal activities.” The OIG also claimed to have found credible and substantive evidence that, by conducting these transactions, YGC has misappropriated the missing and diverted funds.

 It said additionally, that it found that YGC committed other abuses, including breaching provisions in the Programme Grant Agreement with the Global Fund. One of the breaches is a requirement that recipients ensure that Global Fund grants are properly managed and used solely for programme purposes. Also,YGC was accused of breaching a requirement   that “recipients of Global Fund grants cannot benefit from any revenue that may be earned through the use of the Global Fund grant funds; and prohibiting recipients from engaging in transactions funded by the Global Fund Programme Grant Agreement with an entity in which a family member has a financial interest.”

The YGC’s illegal transactions were said to have continued undetected and uninterrupted until the OIG Audit Unit discovered them during the course of their audit of the Global Fund grants to Nigeria in 2010.

On account of the alleged wrong -doings, the OIG recommended two lines of punishment for the YGC. First, was that immediate action be taken to recover from YGC all missing funds and diverted proceeds. The total amount requested from the YGC as refund was put at about US $4 million.

 The second was for the GF to “Immediately terminate YGC as a Principal Recipient and bar any future participation of this entity in any capacity in Global Fund grant programmes.”

In their reaction, YGC made spirited efforts to debunk the issues raised against them in the GF investigation report. It, however, acknowledged that there was an element of risk in the currency transactions it carried out but said that the practice ceased in February 2009, “long before the visit of the OIG.” It went on to argue that under Nigerian law, the use of the parallel currency market is allowed.

 The YGC denied that $824,626 was missing, and rather explained that the funds were justifiably spent on specific areas. It said $401,702 was spent on management fees, $320,023 on salaries and allowances, $28,022 on maintenance  and $74,879 on operational expenses.

YGC also described the OIG report as a criminal investigation.  “A number of prominent Nigerians have been included [in the investigation report] as being associated with some criminal activities. We sincerely hope that these inferences, which are clearly defamatory and liable to long and costly litigation will be deleted completely or suitably modified as they consist [of] voyages of discovery that clearly do not meet international standard and practice of investigation.”

CHAN, another NGO   also featured in the OIG black book of bad fund managers. CHAN which was the Principal Fund recipient, PFR, for the Round 5 Phase 1 TB grant worth US $23 million was also indicted for wrongful use of grants it got from the GF. In fact, it was reported that CCM-Nigeria withdrew CHAN from being Principal Recipient, PR, in the application for Phase 2 due to poor programme performance.

Among areas of incompetence identified by the audit report carried out by the GF was that CHAN maintained manual accounting records for the initial 18 months of grant implementation and installed accounting software which staff could not use. Besides, it was reported that CHAN did keep good financial records, one example being that advances were made to staff bank accounts and these remained unaccounted for at the time of the audit. A total of US$ 389,761 which the organisation spent was also said not to have support documents.

The OIG audit investigation in CHAN was said to have additionally revealed evidence of management override of controls, including through managements approval of transactions that contravened the grant agreement. One example cited in this respect, was the use of programme funds to pay salaries for non-programme staff, amounting to US$ 395,688.

 Like YGC, CHAN was also found to have engaged in unapproved transfer of US$ 11,605,000 to non-programme related bank accounts abroad. Although the funds were said to have been refunded later into the local Naira bank account for the GF fund, the irregular transactions were reported to have resulted in a loss of US$ 130,405.

CHAN’s procurement and logistics management was also found to be weak and resulted in transactions that did not represent value for money. One example cited here again was a case involving the procurement of equipment worth US$ 522,412 for setting up six zonal TB laboratories. The equipment was not installed in five of the laboratories because the laboratory architecture was not appropriate. “There was no evidence seen of correction of the laboratory architecture and if this is not resolved, will result in failure to utilise the funds invested in this equipment,” the audit report said.

For embarking on activities that were not in compliance with GF agreements, CHAN was asked to refund to the Global Fund, US$ 2,501,846 which could not be adequately accounted for or which was not in the approved work plan and budget.

NACA was also indicted with improper management of GF grants. The organisation which was established in 2006 to co-ordinate a broad spectrum of Nigeria’s response to HIV/AIDS   signed four grant agreements with the Global Fund as PR for HIV/AIDS Programmes. The approved grants and amounts disbursed to it as at the time of the audit amounted to $185,778,310.

 But the agency was later discovered, after investigation, to have defaulted in meeting its contractual obligations to the GF. It was found out, for example, that NACA  was not deducting and remitting Pay As You Earn, PAYE, taxes to the Federal Government as required by the law. It was also found wanting in capacity to manage GF grants, especially in financial management, procurement and sub grant management.

Accordingly, NACA was asked to refund to the Global Fund US$ 763,087 which could not be adequately accounted for or which was not in the approved work plan and budget.

Virtually all the other NGO’s that received GF grants were indicted in the audit investigation report for either mismanagement of funds or improper record keeping. It was only YGC, NACA and CHAN, however, that had grievous offences that resulted in the GF to demand huge refunds from them. And from the league of the three worst offenders, NACA escaped the GF ban from further access to grants from the UN agency.

It was a narrow escape for Nigeria. The record of poor performance in fund management could have led to future exclusion from access to GF funds. The Global Fund, which has an annual budget of more than 20 billion dollars, had once suspended grants as a result of misappropriation reported by its Inspector-General in Mali, Mauritania, Zambia and Djibouti.

Fatai Bello, executive secretary, Country Co-ordinating Mechanism, CCM-Nigeria  told Newswatch that Nigeria’s case was not as bad as many thought. He explained that the percentage of money which the GF demanded as refund was not too high, when compared to the totality of money received by each organisation in Nigeria.  “The percentage CHAN is accused of is about 10 percent, which is relatively higher, while that of NACA is 0.67 percent. So, when you look at the percentage computation that we did, Nigeria over all percentage went to 1.55 percent. That is for all the three. The Global Fund, based on other countries they visited, have an average loss of five per cent. So, Nigeria is far below average which means we did not do too badly if you look at the computation”

The CCM executive director said what would have worsened Nigeria’s case was the issue of foreign exchange transaction. He explained that the GF treats issues of that nature as laundering and an unpardonable offence. He assured, nonetheless that Nigeria was on top of the situation and had nothing to panic about. (See Box)

Onyebuchi Chukwu, minister of health, also said the situation was under control. He told Newswatch that arrangements had been put in place by the Nigerian Government to attend to the   issue of recovery of funds as requested by the UN agency, as well as respond adequately to issues raised by the GF in its 2011 audit investigation report. (See Box)

Bello also allayed fears that Nigeria would lose the grants in future. He explained that what saved the grant was that immediately CCM discovered  that the NGOs were having challenges in meeting targets and coping, it quickly appointed another principal recipient as replacement.

As it stands today, he said ARFH, took over TB because they were one of the best performing organisations in the whole world, rated by Global Funds. It replaced CHAN. He said NACA was retained but that it has to refund the said amount.

In the case of the YGC which was principally handling malaria, Bello said the responsibility has now been shared between NMCP and SFH. He explained that if it was only the YGC that was the principal recipient, it would have been difficult for Nigeria to handle.

It was not clear by press time, last week if the Independent Corrupt Practices Commission, ICPC, which had shown interest earlier in probing the NGOs, would still do so. When the matter first blew open last year, ICPC had said in a statement issued by Mike Sowe, head of Public Enlightenment Department, that it would look into the matter.

Sowe, who gave names of the NGOs and amount they were alleged to have misappropriated from the GF grant, said then that the ICPC was worried about the potential damage the audit report posed to the reputation and image of Nigeria, as well as the danger the organisations, through their alleged unwholesome practices were subjecting millions of Nigerians who were suffering from HIV/AIDS, tuberculosis and malaria too. He said the agency would use all available legal instruments to bring the culprits to book.