USAID Review of Health NGO Finds Litany of Irregularities

A financial review by USAID, the U.S. government’s development arm, into local health NGO Reproductive and Child Health Alliance (RACHA) has found financial mismanagement coupled with a lack of transparency and oversight within the organization that may point to evidence of fraudulent activity.

Well-known for its collaboration with the Ministry of Health and the Ministry of Women’s Affairs, and other development partners, RACHA operates across eight provinces in projects relating to family planning and reducing maternal deaths, as well as newborn and child health.

USAID is RACHA’s primary donor, and has provided about 80 percent of the organization’s funding since 2003.

The USAID report, which investigated RACHA’s financial management, procurement practices, and organizational structure, concludes based on a cost analysis that a total of $160,438 spent between 2009 and May 2013 was either not properly accounted for or used to buy items with irregularly high prices.

The report also concludes that a systematic lack of oversight and transparency within RACHA’s finance department, and a lack of segregation between the NGO’s finances and operations units jeopardized “the organization’s ability to prevent and detect…significant errors or fraudulent acts.”

A study of RACHA’s renovation activities at 163 project sites in Prey Veng, Koh Kong, Pursat, Siem Reap and Banteay Meanchey provinces, which cost $3,968,015, found that only RACHA’s senior management were fully involved in procurement practices, and only a handful of favored contractors were informed of the bidding process—hampering free and fair competition, and again leaving the NGO vulnerable to fraud.

The report also found that poor-quality medical equipment was provided to RACHA’s health centers even though the equipment was purchased from a longtime supplier at a much higher price than it was actually worth.

USAID interviews with RACHA staff revealed that medical equipment, including delivery and post-delivery beds, tissue forceps, needle forceps, scissors and forceps for deliveries were of poor quality.

From January 2012 to May 31, 2013, RACHA spent $77,505 on medical equipment, of which 67 percent, or $49,036 was paid to one supplier, Taing Sokheang, according to the USAID report.

One of the poor-quality delivery beds purchased by RACHA from Taing Sokheang caused injury to a pregnant woman at the Mesang Referral Hospital in Prey Veng province after it collapsed with the patient on it.

“Although it has been confirmed by RACHA that the beds have been replaced with the right quality products by the supplier, poor quality equipment previously provided to the health centers by RACHA puts RACHA’s entire project at risk, and could adversely affect USAID’s reputation and development work in Cambodia,” the report concludes.

Other irregularities involved spending on vehicle maintenance and repair, which the report concludes exceeded normal costs by $9,258, while vehicle rental costs of $45,860 were considered questionable, with some rentals not included in the organization’s budget report.

Those rental vehicles, which were unnecessary because the NGO already had a fleet of vehicles, were also inexplicably procured from a sole rental company, ASIA Vehicle Rental Company, the report states, which represents a clear breach of the competition agreement and a violation of both USAID’s and RACHA’s procurement policies.

USAID’s findings follow a much-publicized report in November by the Global Fund to Fight AIDS, Tuberculosis and Malaria, which found “sufficient credible and substantive evidence of corruption, procurement irregularities, and misuse and misappropriation of grant funds” by bodies under the Ministry of Health totaling more than $12 million.

Though the USAID report into RACHA’s financial management does not draw as strong conclusions about corruption as the Global Fund report, its findings spotlight questionable financial practices in another NGO involved in the medical aid field, a sector desperately in need of funds to help those most in need.

On each of the 16 issues the USAID report highlights, it makes recommendations for reform and restructuring that would help remove the potential for corruption and mismanagement at RACHA.

RACHA’s senior management, in a separate report, agreed that there were areas of the organization in need of improvement, and submitted a point-by-point response to USAID’s findings, including restructuring the organization and cooperating with USAID in implementing other required changes.

Chan Theary, executive director of RACHA, said Wednesday that while there are areas of the organization that clearly need to be addressed, USAID found no evidence of corruption.

“In 2010, we had 27 points of review where we had to strengthen; this year there were 16…. Improving is an ongoing process, and we will take appropriate action on each point raised,” she said.

“In all their reviews, USAID have found issues that require internal solutions, but in 10 years—never any corruption,” Ms. Theary said in an interview, adding that in March, she was awarded the Woman of Courage Award by the U.S. Embassy in Phnom Penh.

The second of two consecutive five-year funding periods by USAID for RACHA officially ended in September. However, Ms. Theary said that USAID had already agreed in August to a six-month extension of funding to continue projects with her organization, but those funds had been suspended following allegations of financial wrongdoing made by disgruntled former employees. Those complaints led to the USAID investigation, she said.

“USAID stopped funding because of the allegations by disgruntled former staff that RACHA’s top management is corrupt,” Ms. Theary said.

Funding proposals from RACHA have since been submitted to USAID to cover a further five–year term beginning 2014, she said.

The U.S. Embassy in Phnom Penh on Wednesday denied that it had suspended funding from RACHA, and said the financial review it carried out was standard procedure and that the projects with RACHA had already ended.

“The financial review is a routine process that USAID undertakes with its implementing partners. The current one with RACHA is ongoing,” said embassy spokesman Sean McIntosh.

Mr. McIntosh did not respond to a question regarding the possibility of future USAID funding for RACHA in light of the review’s findings.

The former RACHA employees who filed the complaint with USAID said staff had suffered as a result of the investigation.

“RACHA ran out of budget to maintain all its staff and the staff had to leave without pay for two months, which they agreed to…but then USAID said there was no more funding so now there are no jobs,” said Dr. Nou Sovann, ex-team leader for RACHA’s infectious disease unit, who claimed that 300 staff had lost jobs.

Mr. Sovann said Tuesday that 20 former staff members will stage a protest in front of the RACHA office next week to demand the removal of two top managers—Ms. Theary and her deputy executive director, Nget Lavan.

Ms. Theary said Wednesday that RACHA, which has about 250 employees remaining on other donor projects, is currently in the bidding stage for future USAID projects and that most of the 300 employees who had lost their jobs would be rehired if the bid is successful.

“Normally after the five-year projects end, we have to temporarily reduce staff. But those people who complained to USAID are no longer employees as they were dismissed for wrongdoing, and USAID has the documents to prove that,” she said.

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