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Weak PNG Government plus Smart Advisors equals Missing Aid Millions

HERALD SUN

An Advertiser investigation has found AusAID is investigating 175 fraud cases across 27 countries.

Documents released under Freedom of Information expose a criminal trail in some of the world's poorest countries with widespread theft of cash and forging of receipts.

They also show how food and other supplies are diverted from dirt-poor communities and sold on to the black market at inflated prices.

While AusAID insists it is improving fraud control, the documents also reveal police are often reluctant to charge local criminals - frustrating the agency's attempts to recover missing aid money.

In one case, the Eritrean Government in 2006 seized food and other supplies from the United Nation's World Food Program, saddling Australian taxpayers with a probable loss of $1.25 million.

The revelations will do little to boost public confidence in a foreign aid program that is forecast to nearly double by 2015 to $8 billion a year.

Papua New Guinea has emerged as Corruption Central, with 71 cases of identified fraud - 40 per cent of the AusAID total - involving millions in missing funds.

In one case, a corrupt local official tried to bank a cheque for $522,000 before a diligent bank executive intervened.

Another five-year-old fraud investigation involving illegal purchasing will likely see $258,391 written off.

Indonesia, which will receive $458 million in Australian assistance in 2010/11, has 31 fraud cases, followed by the Philippines (20) and the Solomon Islands (19).

AusAID Director-General Peter Baxter says fraud levels compare "very favourably" with domestic agencies such as Centrelink.

"The level of fraud in our program from 2004/05 until December 2010 was 0.017 of 1 per cent of the $20 billion that had been appropriated to AusAID during that period," Mr Baxter said.

He denied that fraud was on the increase - despite 16 cases reported in November alone.

The FoI documents reveal how taxpayers' money is being squandered, with corrupt local officials and agencies profiting at the expense of the poor.

Australia is one of the biggest aid donors in the world, focusing on the Asia-Pacific, although the Government wants to expand its aid funding into Africa in the coming years.

The FoI documents mention the difficulties of trying to manage a $4.5 billion budget while dealing with some of the most corrupt nations in the world.

One investigation in Fiji, involving fraud of $37,670, has been closed, with AusAID declining to report the matter to the police "due to the highly sensitive political environment" on the Pacific island nation.

At other times AusAID has struggled to establish fraud "because of the lack of a paper trail", while on other occasions businesses were paid money but then closed their offices.

An unknown amount of AusAID money has been caught up in a major scandal involving the African country of Mali, where health workers are alleged to have embezzled hundreds of thousands of dollars.

The fraud involved a raft of "managing contractors" who are paid hundreds of millions of dollars to manage aid projects. These contractors include Cardno Limited, which is involved in 40-odd cases of fraud.

Houses that were supposed to be supplied for hospitals in PNG last May were not delivered, "and requests for a refund have been refused", the documents say. The cost to taxpayers will be just shy of $50,000.

Foreign Affairs Minister Kevin Rudd has announced a review of the entire foreign aid program, following an Advertiser investigation last year that found millions of dollars were being wasted and gobbled up by highly paid consultants.

The review will examine AusAID's effectiveness in identifying and managing fraud across its budget.