- Associated Press - Tuesday, May 10, 2011

GENEVA (AP) - A global health fund championed by celebrities and world leaders is considering scaling back its groundbreaking philosophy of full transparency about how it spends billions of dollars in health care in poor countries. Its decision could have broad consequences for the ways international aid groups operate.

Revelations this year by The Associated Press about misspent funds and corruption among recipients of the money _ and the donor backlash that has followed _ have prompted leaders of the Global Fund to Fight AIDS, Tuberculosis and Malaria to propose scaling back on the investigations that uncovered the problems, and revealing less about them to donors and the public.

On Wednesday, the fund’s board will discuss proposals to shorten investigations and to change the way its financial losses are presented. Board members are keenly aware that their decision will be viewed as a broader statement on the limits of transparency in the development aid world.

Few, if any, other major aid groups disclose much of their financial inner workings. And if the Global Fund pulls back on its open-books policy, it’s unlikely any of them would move in that direction.

The Global Fund’s internal watchdog fiercely opposes the proposed changes. In its latest progress report, obtained by the AP, Inspector General John Parsons warns the board that a move toward less transparency “could be interpreted negatively and as a purposeful effort to suppress material information.”

The fund was set up in 2002 to be different, and in 2007 appointed Parsons to investigate its operations and publish his reports on its website. That strategy, however, has come back to haunt the fund.

In January, the AP reported that the fund was bleeding tens of millions of dollars to mismanagement and corruption, prompting Germany, the European Commission and Denmark to withhold $457 million (euro315 million) in funding. The fund warned Germany that its withheld dollars would lead to the deaths of 43,000 people; Germany called that “extremely questionable” and said it’s corruption that kills.

“The Global Fund has set very high standards of transparency in all aspects of its works,” said Dr. Christoph Benn, the fund’s external relations manager. “But as a result, we have recently been severely punished for this dedication to reporting whatever goes wrong.”

The president of the board, Ethiopian Health Minister Tedros Adhanom Ghebreyesus, opposes any changes.

“Even the mere appearance of suppression of information is unacceptable. Scaling back, or the perception that we are retreating from, this commitment is something we simply cannot allow,” Tedros said. If anything, he added, “we should increase our level of transparency.”

Meanwhile, the revelations from Parsons‘ team of 30 investigators and auditors are creating deep tensions within the fund.

Its executive director, Dr. Michel Kazatchkine, has sought to minimize the scale of misspent money, saying the problems uncovered represent only 0.3 percent of Global Fund expenditures. Parsons openly challenged that in his report, saying the figure _ which takes fraud uncovered as a percentage of the fund’s total disbursement, rather than as a percentage of the grants examined _ is not accurate. Kazatchkine said the fund will no longer refer to the figure “as an appropriate denominator.”

The losses now total almost $53 million from fraud, undocumented spending and ineligible expenses, according to the progress report and other unpublished documents provided by senior fund officials. Parsons says active investigations are uncovering more, and Kazatchkine’s office acknowledged that if Parsons‘ office doubles the amount it reviews, then “the amount of losses identified may also double.”

In 12 nations where Parsons‘ office reviewed more than a half-billion dollars in spending, reviews turned up an average of 8 percent of the money was misspent. Parsons says it would be misleading to extrapolate that number to the fund’s total spend, in part because the reviews focused on the most risk-prone places.

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