A $46.9 million anti-malaria grant set to be launched next year by the Global Fund will go ahead only if its finances are no longer managed by the government’s National Malaria Center.

The switch comes amid a highly confidential, ongoing investigation by the fund, which a spokesman for Cambodia’s single largest health donor last night said “uncovered credible and substantive evidence of serious financial wrongdoing, on procurement and other issues”.

“Immediate action has been taken to protect the health of people supported by Global Fund grants in Cambodia, by adopting safeguards in procurement, financing and management. The Global Fund and country stakeholders are also considering potential changes in implementer arrangements,” communications department head Seth Faison wrote in an email.

In an announcement printed in a local English-language newspaper on Wednesday, the fund’s local partner writes that approval for the next round of grants had been made “conditional upon the Country Coordinating Committee identifying a new Principal Recipient for the grant”.

The grant is expected to go into effect on April 1, 2013.

Now, a government agency – the National Center for Parasitology, Entomology and Malaria control – is the principal recipient, which means it has autonomy to manage the finances granted by the fund.

Tia Phalla, chair of the Fund’s Country Coordinating Mechanism (CCM) and vice chair of the government’s National AIDS Authority, confirmed that the request was made at the Fund’s behest but declined to speak further on the matter.

A member of the fund’s Country Coordinating Mechanism – which serves as the local management body – said the fund had grown to believe the government’s malaria body was incapable of handling the finances.

“Maybe there were some capacity issues, some management issues,” said the high-level CCM member speaking on the condition of anonymity, because committee members have agreed not to speak to the press. “They [the Global Fund] requested us to change the Principal Recipient just on October 30.”

If a qualified institution cannot be found, the source said, the UNDP has been tapped to manage the large-scale grant.

In an email, the UN Resident Co-ordinator’s Office said it could not confirm, as it was unable to comment on “details of operational matters” until the investigation was released.

For more than 18 months, the Geneva-based organisation has been running an investigation into its Cambodia programs, headed by its Office of the Inspector General.

Since 2003, the Global Fund to Fight AIDS, Tuberculosis and Malaria in Cambodia has approved $116.8 million in funding for malaria programs alone, and $353.3 million in total. But the programs – particularly the malaria one – have been beset with allegations of corruption and financial mismanagement.

In the last country audit, published in October, 2010, the inspector general detailed financial malfeasance within the National Malaria Center ranging from disbursement fraud to budget mismanagement.

Nearly $18,000 of “ineligible” expenses were incurred in 2008, the report notes. In one especially egregious case, the cost of a coffee-maker was budgeted at $1,590. In another, $3,440 was spent on four mobile phones “purchased for senior management”.

The investigation also highlighted an excessive travel schedule in which “the amount of time spent away from core program activities was significant and affected the effectiveness of the program, as staff were not available to implement program activities”.

National Malaria Center director Dr Char Meng Chuor, deputy director Dr Kheng Sim and chief administrative officer Dr Muth Sinuon could not  immediately be reached for comment yesterday, as they are attending conferences abroad. Emails to all three were not responded to by the time of going to press, and repeated phone calls to Dr Chuor over the past three weeks have gone unanswered.

Although anticipated by insiders, the management shift is evidence of long-standing concerns by the fund.

In a “score card” of its program published earlier this year, the fund hinted that the days of keeping a government body as the “principal recipient” were numbered.

“[M]ajor issues... remain as management risks – including significant weaknesses in forecasting and quantification, pending fulfilment of contractually binding conditions and serious concerns on financial management,” the report notes.

“In response to the preliminary findings of the Office of the Inspector General, the Secretariat is considering immediate risk-mitigating actions to safeguard Global Fund investments, including stronger

fiduciary controls around procurement and financial transactions,” it continued.

Among the controls the fund anticipated was “a newly proposed management model”, which the report said might be necessary and for which it recommends earmarking five per cent of the grant.

This figure is in line with one suggested by the CCM source, who said yesterday they anticipated providing about six per cent in administrative fees to whoever is chosen as the new Principal Recipient.   

Although the fund confirmed its new safeguards, a spokesman stressed there was no intention to halt grants, and sought to underscore achievements made over the years, including an 80 per cent drop in malaria deaths.

“The evidence of wrong-doing uncovered by the Global Fund does not diminish the striking successes and impact that Global Fund grants have helped achieve through programs implemented by health officials, civil-society organisations and partners in Cambodia,” Faison said.

Representatives of the UNDP and French and Australian embassies said they were aware of the ongoing investigation but declined to comment until the Global Fund published its report.

The fund said it would be released in the coming weeks.

“As a donor to the Global Fund, AusAID is extremely concerned by the allegations and is awaiting the outcome of the investigation before taking any further action,” an Australian embassy spokesman said.

Ministry of Health spokesman Ly Sovann said he was not able to comment, as he had no involvement with the malaria program, and a man answering health minister Mam Bun Heng’s phone said he was only his driver. 

To contact the reporters on this story: Abby Seiff at [email protected] and David Boyle at [email protected]

With assistance from May Titthara