Audit Report Global Fund Grants in the Republic of Mali GF-OIG-17-023 20 November 2017 Geneva, Switzerland What is the Office of the Inspector General? The Office of the Inspector General (OIG) safeguards the assets, investments, reputation and sustainability of the Global Fund by ensuring that it takes the right action to end the epidemics of AIDS, tuberculosis and malaria. Through audits, investigations and advisory work, it promotes good practice, reduces risk and reports fully and transparently on abuse. Established in 2005, the OIG is an independent yet integral part of the Global Fund. It is accountable to the Board through its Audit and Finance Committee and serves the interests of all Global Fund stakeholders. Its work conforms to the International Standards for the Professional Practice of Internal Auditing and the Uniform Guidelines for Investigations of the Conference of International Investigators. 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Service available in English, French, Spanish, Russian, Chinese and Arabic Letter: Office of the Inspector General Telephone Message - 24-hour voicemail: Global Fund +41 22 341 5258 Chemin de Blandonnet 8, CH-1214 Geneva, Switzerland Fax - Dedicated fax line: +41 22 341 5257 Email [email protected] More information www.theglobalfund.org/oig Audit Report Advisory Report Investigations Report OIG audits look at systems and processes, both OIG advisory reports aim to further the Global OIG investigations examine either allegations at the Global Fund and in country, to identify the Fund’s mission and objectives through value- received of actual wrongdoing or follow up on risks that could compromise the organization’s added engagements, using the professional skills intelligence of fraud or abuse that could mission to end the three epidemics. The OIG of the OIG’s auditors and investigators. The compromise the Global Fund’s mission to end generally audits three main areas: risk Global Fund Board, committees or Secretariat the three epidemics. The OIG conducts management, governance and oversight. may request a specific OIG advisory administrative, not criminal, investigations. Its Overall, the objective of the audit is to improve engagement at any time. The report can be findings are based on facts and related analysis, the effectiveness of the Global Fund to ensure published at the discretion of the Inspector which may include drawing reasonable that it has the greatest impact using the funds General in consultation with the stakeholder who inferences based upon established facts. with which it is entrusted. made the request. 20 November 2017 Geneva, Switzerland Page 2 Table of Contents 1. Executive Summary .................................................................................................................. 4 1.1. Opinion .................................................................................................................................. 4 1.2. Key Achievements and Good Practices ................................................................................. 4 1.3. Key Issues and Risks ............................................................................................................. 5 1.4. Rating .................................................................................................................................... 6 1.5. Summary of Agreed Management Actions ........................................................................... 6 2. Background and Context .......................................................................................................... 7 2.1. Overall Context ...................................................................................................................... 7 2.2. Differentiation Category for Country Audits: Mali ............................................................... 7 2.3. Global Fund Grants in the Country ....................................................................................... 8 2.4. The Three Diseases ................................................................................................................ 8 3. The Audit at a Glance .............................................................................................................. 10 3.1. Objectives ............................................................................................................................ 10 3.2. Scope ................................................................................................................................... 10 3.3. Progress on Previously Identified Issues ............................................................................ 10 4. Findings ................................................................................................................................... 11 4.1. Supply chain improvements ................................................................................................. 11 4.2. Programmatic Data and Service Quality Improvements .................................................... 14 5. Table of Agreed Actions .......................................................................................................... 16 Annex A: General Audit Rating Classification ................................................................................... 17 Annex B: Methodology ....................................................................................................................... 18 20 November 2017 Geneva, Switzerland Page 3 1. Executive Summary 1.1. Opinion Mali has made significant progress in the fight against the three diseases despite a challenging operating environment. The supply chain is able to distribute medicines, but significant efforts are needed to automate inventory management to reduce expiries, stock-outs and delays as well as to ensure consistency of data. Hence, this area is rated as partially effective by the OIG. The quality of program data and services has also improved. However, gaps remain with material data inconsistencies noted across various levels of data collection and reporting; non-adherence to treatment guidelines; and delays or non-provision of testing or treatment. Although most of these gaps have been identified by related assurance mechanisms, the current processes to follow up and address them are considered only partially effective. Following the identification of extensive financial irregularities in 2010 (See section 3.2), the Secretariat put in place significant measures, including replacing the Principal Recipients and instituting a zero cash policy at the sub-recipient levels. These measures have significantly reduced the financial risks and irregularities in the programs. As a result financial systems and processes are generally functioning effectively. 1.2. Key Achievements and Good Practices Progress in reducing disease burdens. Total Global Fund investments of over US$314.4 million in Mali since 2003 have contributed significantly to a reduction in malaria mortality and the number of people with HIV on antiretroviral treatment. Malaria deaths decreased from 20 per 100,000 in 2010 to less than 10 per 100,000 in 2015.1 About 10.5 million mosquito nets were distributed in Mali between 2013 and 2015,2 with the support of the Global Fund and the US President’s Malaria Initiative (PMI). Similarly, antiretroviral treatment coverage of people living with HIV increased from 40% to 58%3 between 2014 and 2016. The Global Fund finances approximately 36% of malaria needs4 and about 90% of Mali’s HIV program5. Improved financial controls through additional measures instituted by the Secretariat. The Principal Recipients put in place for HIV and tuberculosis (TB) grants after the financial irregularities in 2010, have generally effective financial management and procurement processes and controls. This includes advances; bank reconciliations; segregation of duties; automated procurement and payment systems; and approvals on price revisions. They also properly document and archive financial data. Measures underway to improve supply chain as well as data and service quality on the portfolio. Mali has progressed significantly with the implementation of inventory and logistics management and district health information systems, with support from the Global Fund and other development partners. These systems have already improved the quality and timeliness of information available from health facilities and regions, with some gains in reducing stock-outs, drug expiries, treatment disruptions, and better compliance with treatment guidelines. Supply, distribution and treatment guidelines have been largely embedded and coordination mechanisms have been introduced throughout the health systems, which have contributed to these related gains. Furthermore, sufficient storage capacity, cleanliness and good distribution arrangements generally exist in the supply chain. The assurance mechanisms have been generally effective in identifying programmatic data and quality of service challenges. For example, HIV data quality audits had reported all or similar issues to those identified by the OIG. Similarly, the sites visited received satisfactory integrated supervision 1 World Malaria 2016. 2 http://apps.who.int/iris/bitstream/10665/252038/1/9789241511711-eng.pdf?ua=1 3 Acitivity report CSLS (Year 2016) 4 http://apps.who.int/iris/bitstream/10665/252038/1/9789241511711-eng.pdf?ua=1 5 Concept note 2015 20 November 2017 Geneva, Switzerland Page 4 from national and regional levels. The supervision reports had already identified all the main gaps. An automated health information system, DHIS 2, has recently been rolle d out, and program data for both malaria and HIV programs has been migrated to this new system. 1.3. Key Issues and Risks Further improvements needed in supply chain. National quantification and forecasting for HIV drugs by the relevant implementer coordinating committee should be more systematic with regular meetings including all stakeholders. This is necessary to avoid emergency orders of antiretroviral drugs (as noted in 2017) and to include supplies from partners like UNICEF. Furthermore, quantification and inventory management should include all levels, not just the central warehouses, to avoid the risk of health commodity overstocking or overbudgeting. Delays in the distribution of commodities should be avoided in future to avoid negative programmatic impact as was the case in 2017 when three million mosquito nets were distributed eight months late in the Mopti region. The districts reviewed in the audit have had an average stock-out level of 34% for malaria products since January 2017. Despite a lack of training or staffing support, distribution managers handle inventories, manage financial records for commodities that are sold, and enter data in the logistics information system, with resulting data quality issues. Furthermore, 77% of health products sampled during the audit had material differences between physical quantities and manual registers. Drugs reordering is not fully compliant with distribution guidelines, leading to irregular ordering and distribution, and contributing to supply chain challenges. Also, fire and temperature controls need significant improvement in warehouses at all levels. The automated inventory and Logistics Management Information System (LMIS) presents a significant opportunity to address many of the issues noted above. While inventory data for most malaria and some HIV commodities is already available in this system, it is not yet being aggregated into national inventory positions and drugs consumption. Nor is it being analyzed for effective decision-making. This could help prevent stock-outs or overstocking such as those noted in 2017. For example, in May 2017, there was a national stock-out of government-financed third-line antiretrovirals for a month as well as over-stocking of other supplies in regional warehouses. At the same time, some facilities in the same region had stock-outs in Q1 2017. There has also been a stock- out since February 2017 of HIV testing reagants at the central warehouse in Bamako, the Pharmacie Populaire du Mali. Similarly, aggregated drugs consumption based on supply chain data can be compared against total patients treated from health systems to identify anomalies, inaccuracies or supply chain leakages. Comparative analyses conducted as part of this audit indicated apparent significant data anomalies. Effective follow-up and remediation are needed to address known data and service quality weaknesses. Program data and service quality continue to show weaknesses, although automation is progressing and effective assurance mechanisms are now actively identifying the issues. Material data deficiencies were identified throughout the reporting chain, including in primary health care records/ registers, monthly reports from health facilities, and at the national data level. Due to the lack of systematic follow-up, the integrated supportive supervision visits have limited effectiveness in resolving the identified data issues. A lack of quality assurance on data submissions and the absence of a national codification of HIV patients also contribute to data issues. Testing and treatment gaps also exist in disease programs, including some cases of malaria treatment without proper testing, HIV treatment without CD4 or viral load testing, or failure to provide treatment because testing could not be performed. Stock-outs of essential health commodities and breakdown of testing equipments contribute to these gaps. 20 November 2017 Geneva, Switzerland Page 5 1.4. Rating  Objective 1. Effectiveness of the supply chain internal control systems and assurance mechanisms to deliver and account for medicines procured under the Global Fund programs. The supply chain internal control systems and assurance mechanisms are currently partially effective. The roll-out of automated inventory and logistics information systems as well as supply and distribution guidelines have improved the supply chain of drugs. However, recurring stock-outs and data inaccuracies continue to exist, contributing to emergency orders and testing/ treatment disruptions. Useful information generated by the automated systems need to be analysed and used effectively for pre-empting supply chain issues.  Objective 2. Effectiveness of the program supervision and other internal controls in providing accurate program data and appropriate services to the patients. The assurance and supervision mechanisms have successfully identified the issues of material inconsistences in primary data records/ registers, health facilities/ treatment center reports and national disease statistics. However, due to weak follow-up of supervision findings, there is limited effectiveness in rectifying the identified weaknesses. The lack of national codification of HIV patients adds to the risk of data inaccuracies. Treatment facilities for both malaria and HIV exist at all levels, while treatment protocols and guidelines have also been developed and are widely disseminated. However, stock-outs of essential drugs or equipment breakdowns have also resulted in instances of non-adherence to treatment protocols, treatment delays or failure to treat. Overall, the controls on program services and data were found to be partially effective.  Objective 3. Design of financial controls and assurances in identifying and treating financial issues. Since the change in grant implementation arrangements and the introduction of additional safeguards after 2010, financial management and procurement processes and controls for both grant recipients were found to be generally effective, with limited operational financial issues identified during the audit, or reported through other assurance arrangements. 1.5. Summary of Agreed Management Actions The Secretariat will work with the national programs and development partners to complete inventory management automation and data migration. The automation benefits will be maximized by embedding standard processes ensuring use of additional data in decision-making. This will include aggregation of inventory positions and drugs consumption, and their triangulation with health data. Efforts will also made to enhance coordination among all stakeholders, and address staffing/ training needs of inventory management staff. For data and service quality, the Secretariat will work with the national programs to: a) develop and implement tools for more effectively tracking supervision findings and recommendations; b) strengthen data quality assurance and review prior to reporting to next levels; and c) explore national codification of HIV patients. 20 November 2017 Geneva, Switzerland Page 6 2. Background and Context 2.1. Overall Context Mali is a low income country with a population of 17.6 million.6 About 49% of its population live below the poverty line, making it one of the 25 poorest countries in the world.7 It is ranked 175th out of the 188 countries in the United Nations Development Program (UNDP) 2016 Human Development Index report.8 Transparency International’s 2016 Corruption Perceptions Index ranks the country 116th out of a total of 176.9 Mali is also considered to be at a high risk of failed state according to the non-profit organization Fund for Peace’s Fragile State Index. Civil war affects the three northern regions (Tombouctou, Kidal and Gao), constituting approximately 60% of the country’s geographical area but comprising less than 10% of its population.10 In the remaining southern regions, which make up 40% of the country’s territory but where 90% of the population lives, the security situation is rated high11. In addition, Mali has weak institutional and poor physical infrastructure. All these factors affect health service delivery. Mali ranked 42nd among the 49 low-income countries that have been prioritized for improvements under the UN Global Strategy for Women’s and Children’s Health. The country has a low ratio of health care workforce with an average of three health staff per 10,000 people; this low staff capacity affects the health service delivery.12 2.2. Differentiation Category for Country Audits: Mali The Global Fund has classified the countries in which it finances programs into three overall portfolio categories: focused, core and high impact. These categories are primarily defined by size of allocation amount, disease burden and impact on the Global Fund’s mission to end the three epidemics. Countries can also be classed into two more categories: Challenging Operating Environments and those falling under the Additional Safeguard Policy. Challenging Operating Environments are countries or regions characterized by weak governance, poor access to health services, and manmade or natural crises. The Additional Safeguard Policy is a set of extra measures that the Global Fund can put in place to strengthen fiscal and oversight controls in a particularly risky environment, generally used in Challenging Operating Environments. Mali is: Focused: (Smaller portfolios, lower disease burden, lower mission risk) X Core: (Larger portfolios, higher disease burden, higher risk) High Impact: (Very large portfolio, mission critical disease burden) X Challenging Operating Environment X Additional Safeguard Policy 6 World Bank Country Profile, http://data.worldbank.org/country/Mali 7 World Bank: http://povertydata.worldbank.org/poverty/country/MLI 8 http://hdr.undp.org/sites/default/files/2016_human_development_report.pdf. 9 https://www.transparency.org/news/feature/corruption_perceptions_index_2016. 10 Figures based on Mali Fourth Genera Census of Population and Housing 2009. 11 Mali security risk is rated as high as per Bureau of Diplomatic Security, United States Department of State (OSAC) (https://www.osac.gov/Pages/Home.aspx). 12 http://www.who.int/hrh/workforce_mdgs/en/ 20 November 2017 Geneva, Switzerland Page 7 2.3. Global Fund Grants in the Country Since initiating operations in Mali in 2003, the Global Fund has committed over US$262 million and disbursed US$236 million to accelerate the end of the epidemics of AIDS, TB and malaria in the country. There are currently four active grants in the country. Table 1: Active Global Fund grants to Mali – July 2016 Active Principal Recipient Disease Grant period Signed grants component amount US$ MLI-H-UNDP United Nations HIV/AIDS January 2016-December 2018 46,567,914 Development Programme MAL-H-Plan Plan International HIV/AIDS January 2016-December 2017 7,522,109 MLI-M-PSI Population Services Malaria January 2016-December 2018 59,459,425 International MLI-T-PLAN Catholic Relief Services Tuberculosis January 2016-December 2017 7,796,999 121,346,445 These grants also include some health system strengthening activities. The active grants are managed by three international non-governmental organizations - Population Services International (PSI), Plan International and Catholic Relief Service- and one UN agency– UNDP. The four Principal Recipients currently work with 10 sub-recipients which include the national disease programs under the Ministry of Health, international non-governmental organizations and United Nations Agencies. Six more sub-recipients are budgeted for the malaria grant, although there have been delays in engaging them. Overall, 76% of total grants in Mali are budgeted at the level of Principal Recipients. However, some key non-cash activities of health services provision and storage are implemented at sub-recipient level and through the national programs. Approximately 51% of Global Fund grants are allocated for the procurement of medicines and health products, 17% to human resources, and 11% to administrative costs. Other cost categories include technical assistance, equipment, trainings, monitoring and evaluation and living support. Mosquito nets and malaria medicines are procured by the headquarters of PSI USA. Most other HIV medicines and health products are procured through UNDP. The Pharmacie Populaire du Mali manages the central storage of medicines and other health products (except mosquito nets, which are managed directly by PSI), with onward distribution through eight regional warehouses and across the country. 2.4. The Three Diseases HIV and AIDS: Mali has a generalized HIV epidemic 38,000 people currently on but with higher concentration among key populations antiretroviral therapy14 (pregnant women, men who have sex with men and HIV prevalence (adult population): female sex workers). The country has recently adopted 1.3%15 the “test and treat” policy, with the intention of starting treatment for all cases that are tested positive for HIV. Number of people living with HIV: 110,00016. The Global Fund is the largest donor for HIV in Mali, constituting approximately 75% of total HIV funding.13 13 Mali Concept Note for HIV and TB for 2016-17. Figures based on total funding for years 2015-17. 14 Progress Update March 2017 15 UNAIDS: http://www.unaids.org/en/regionscountries/countries/mali (2015) 16 UNAIDS: http://www.unaids.org/en/regionscountries/countries/mali(2015) 20 November 2017 Geneva, Switzerland Page 8 Malaria: The disease is endemic in Mali, with 90% of Six million insecticide-treated the population in high transmission zones. There were nets distributed in 201519 an estimated 6.1 million – 9.1 million cases and an estimated 16-25,000 deaths in 2015, constituting approx. 4% of global malaria deaths17. 3.7 millions artemisinin combination based therapy The Global Fund and PMI are the largest donors for treatment courses delivered in malaria in Mali. The Global Fund contributes 36% of 2015.20 total malaria investments in Mali, while PMI contributes 43%.18 TB: Mali’s TB burden incidence (annual new cases) is 7015 new smear-positive TB estimated at 10 per 100,000 population, and constitutes cases detected and treated. 0.1% of the global disease burden. Prevalence is 92 Treatment success rate for new per 100,000 population, with approximately 16,000 total and relapse cases : 73%21 patients in Mali. Treatment coverage :67% The Global Fund and the government fund most TB interventions in the country. 17 http://www.who.int/malaria/publications/world-malaria-report-2016/report/en/ 18 http://www.who.int/malaria/publications/world-malaria-report-2016/report/en/ 19 http://apps.who.int/iris/bitstream/10665/252038/1/9789241511711-eng.pdf?ua=1 20 http://apps.who.int/iris/bitstream/10665/252038/1/9789241511711-eng.pdf?ua=1 21htps://extranet.who.int/sree/Reports?op=Replet&name=%2FWHO_HQ_Reports%2FG2%2FPROD%2FEXT%2FTBCountryProfile&I SO2=ML&LAN=EN&outtype=html 20 November 2017 Geneva, Switzerland Page 9 3. The Audit at a Glance 3.1. Objectives The audit sought to provide reasonable assurance on whether grants to the Republic of Mali are adequate and effective in supporting the achievement of impact in the country. The audit particularly focused on:  the effectiveness of internal controls and assurance mechanisms over the supply chain for medicines procured under the Global Fund programs;  the adequacy of controls over program data and the effectiveness of the program supervision process; and  the design of financial controls. The audit also reviewed and assessed ongoing improvements towards resolving identified issues. 3.2. Scope The audit covered the period from January 2016 to June 2017. Its scope included grants implemented by two Principal Recipients – PSI USA at both Principal and sub-recipients levels (for malaria), and UNDP at sub-recipients level only (for HIV). For both grants, the audit covered operations up to the final provision of services, including national programs’ health facilities, and storage and distribution networks. The OIG visited the two Principal Recipients for malaria and HIV, the sub-recipient for malaria, one out of five sub-recipients for HIV, and a sample of 22 sites across the country; these sites included central and regional warehouses, hospitals and health facilities. The audit covered four regions (Segou, Sikasso, Koulikoro, Bamako), which account for 63% of Mali’s population, 71% malaria positive cases tested and 85% of people living with HIV under treatment in 2016.22 Based on risk assessment and the agreements recognizing the single audit principles for international entities by their internal audit functions, the OIG did not cover procurement by UNDP and PSI. The TB and HIV grants implemented by Catholic Relief Services and Plan International were not covered by the audit due to their lower materiality compared to the other grants. The OIG did not perform detailed expenditure verification for the grants thanks to the strong financial controls identified at the Principal Recipients. These account for 76% of the budgeted grant expenditures. Additional financial controls are also applied at the sub-recipient level through low- cash policies. 3.3. Progress on Previously Identified Issues Previous relevant OIG Investigations An OIG audit of the Mali portfolio started in 2010, however, due to extensive financial irregularities, the audit was canceled and Investigation of grants in replaced by an investigation. The investigation identified banking Mali GF-OIG-11-002, fraud, misappropriation of funds, expenditure fraud, procurement irregularities, and a lack of oversight. The issues were largely Investigation of grants in attributable to weaknesses in the financial management capacities Mali GF-OIG-14-015 of the Principal Recipients. Subsequently, new recipients were engaged, with the national programs continuing to implement the health services, while functioning as sub-recipients. The Global Fund also instituted mitigation measures such as zero cash policy at the sub recipient level in response to the high fiduciary risks on the portfolio. This has subsequently evolved into low cash use by sub-recipients. Under these arrangements, the Principal Recipients make most of the payments to suppliers. Sub-recipient expenditure is less than US$10 million, which is under 15% of total expenditures from 2013-2016.23 22 Mali Fourth Genera Census of Population and Housing 2009. 23 Based on the available Enhanced Financial Reports for the Malaria and HIV grants for the years 2013-16. 20 November 2017 Geneva, Switzerland Page 10