International AIDS Nonprofit Hit by Financial Questions

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February 1, 2011; Source: Seattle Times | As a result of questions of fraud and financial mismanagement at Health Alliance International (HAI), its budget will shrink to $7 million and it has sacked half of its Seattle staff and 9 out of 10 of its Mozambique employees.

HAI had become USAID’s primary organization for HIV/AIDS work in Mozambique. It grew to a budget of $21 million in 2009, employing 40 people at its Seattle headquarters and 1,000 people in Mozambique through the Ministry of Health – but those days are over.

The controversy came to a head when HAI applied for a $100 million USAID grant, judged by the agency as the best technical proposal it had received – until a “tipster” reported problems in one of the organizations HAI contracted with in Mozambique. HAI acknowledged its insufficient financial oversight of the group (which distributed basic medical kits) and proposed a plan to strengthen oversight of its subcontractors, but USAID shot the plan down and HAI lost the contract.

HAI is housed at the University of Washington and has functioned as a significant recipient of U.S. government-funded work for treatment of people with HIV/AIDS in Africa since its beginnings in 1987. Although it has received foundation moneys, such as a $10 million grant from the Doris Duke Foundation’s Africa Health Initiative, all but 7 percent of its funding is governmental money.

The Seattle Times article is unclear about how much money may have been lost to fraud and inadequate subcontractor oversight, but HAI is not alone having to deal with the problem of corruption.

Not long ago, the Global Fund to Fight HIV/AIDS, TB, and Malaria acknowledged losing $34 million to corruption in four countries, prompting one donor to halt contributions. Technical and medical solutions to health issues in Africa are certainly needed, but so is the governmental and civic infrastructure that helps ensure that resources get to where they are supposed to go.—Rick Cohen

  • rick cohen

    Here’s a clarification. We received a call from someone at HAI suggesting two very helpful modifications to our reporting of this Seattle Times story: first, that the financial mismanagement here wasn’t on the part of HAI itself, but on some of its in-country subcontractors working in Mozambique, and second, that the amount of money involved in this, while unstated in the article, was a very small proportion of the HAI contract work with USAID and hardly of the scale of the corruption revealed in the Global Fund to Fight HIV/AIDS. The issue of subcontractor problems in developing countries, as we noted, is hardly unknown and is an issue bedeviling prime contractors on numerous development aid projects. As we pointed out, HAI proposed corrective actions regarding improved subcontractor monitoring and oversight, but USAID rejected them. We know that there are new procedures at USAID regarding issues of corruption in foreign aid. The USAID concern about HAI wasn’t about the home office, but about field-based subcontractors. Was USAID’s treatment of HAI simply a reflection of relatively new standards and procedures for how the agency treats financial problems in aid programs or a message to other foreign aid agencies meant to convey something about USAID’s anti-corruption commitment? In either case, the problem wasn’t at HAI headquarters, and it involved an amount of money hardly comparable to the Global Fund’s problem.