This week, The Associated Press reported on these disclosures with the hostile headline: “Fraud plagues global health fund.” The Global Fund has been defended with the valid observation that the total fraud found accounts for a tiny percentage of its overall grants. But we’d like to do more than defend the Global Fund; we’d like to praise it for these disclosures.
The idea that disclosing failures should be rewarded has gained steam in our corner of the sector, particularly with the new AdmittingFailure.com site (see coverage by Good Intentions Are Not Enough and Tactical Philanthropy). We agree with the idea (previous posts on the topic here and here). But scanning the compilation at AdmittingFailure.com, we don’t see any admissions of failure that are as concrete, specific, and risky as the fraud disclosures the Global Fund has been making with some regularity.
To us, the key points regarding the Global Fund (aside from the fact that the percentage of funding reported as misused is small) are that
- Disclosing these issues is a choice made by the Global Fund. In our investigations of large charities, we’ve seen no evidence that donors are auditing them in a way that would force disclosure of lost funds. We’ve also seen no evidence that these organizations have any way of even knowing when funds have been misused. Take UNICEF for an example: if UNICEF lost millions of dollars to fraud, it isn’t clear to us how (or whether) anyone would find out about it.
- Other large charities could easily be seeing as much fraud, or more. We believe it is difficult to get anything done overseas without significant local help. Though it can be hard to tell, we believe that large organizations usually work with governments and with smaller community-based organizations, giving both opportunities to misappropriate funds. Even when they are officially executing their own programs, there’s a large number of degrees of separation between donors in the U.S. and local/locally connected people assigned to execute on the ground. We don’t see any reason to expect a systematically higher level of honesty from these people than from the people the Global Fund has worked with.
Bottom line – we feel that any large bureaucratic organization, particularly one that does a lot of grantmaking, could be losing a lot of money to fraud; what’s unusual about The Global Fund is that it is actively searching for these cases, disclosing them publicly, and then discussing (also publicly) how they can be addressed (PDF).
The Global Fund is not one of our top-rated charities; we think there are groups with even stronger reporting, and/or less complexity and bureaucracy to their activities, that we prefer for maximum impact. However, this incident reinforces our belief that The Global Fund has outstanding transparency compared to similar organizations. We think its disclosures of fraud deserve a place on AdmittingFailure.com and praise, not hostile headlines.