Internal CIDA Documents Show It Failed To Track Aid Funds To Zambia

PI Exclusive: Internal documents obtained by PI show CIDA failed to
detect fraud
Posted on January 17, 2011 by Probe International

(Jan. 17, 2011) Probe International obtains internal CIDA documents
that show the aid agency failed to detect the fraudulent use of its
funds in Zambia.

The recent corruption scandal inside Zambia´s Ministry of Health
involving the theft of Canadian, Swedish and Dutch aid money caused
Sweden´s minister for foreign aid, Gunilla Carlsson, to speculate
that had a whistleblower inside the Zambian government not sounded
the alarm, the fraud very likely would have continued unabated. Now, Probe
International has learned from internal documents obtained through an
Access to Information request that Canada´s aid agency, the Canadian
International Development Agency (CIDA), was caught completely off guard
by the corruption scandal and had no knowledge or ability to detect that
its funds were being used inappropriately.

The documents paint a picture of an agency incapable of determining
if and how its money is being used to line the pockets of corrupt
officials. And while the documents obtained by Probe International
relate to the Zambian corruption case, they also show that Canadian
foreign aid programs in Kenya´s education sector have suffered a
similar fate.

According to the documents, officials were initially unsure whether
the Zambian corruption allegations were true and how much Canadian
aid money had been subject to the fraud. In their early estimates,
officials underestimated the amount of money stolen by more than
half.

Eventually, CIDA determined that $880,000 of Canadian taxdollars were
diverted by corrupt officials. In total, more than $7-million, including
money from other donors such as Sweden and the Netherlands, was stolen.

The documents also show that Canadian aid officials never laid out
strong procurement guidelines when they handed the money over.
According to one email, an official said, "effective performance of
public procurement is not an explicit condition of the CArr
(Condition Agreement)...nor is it a specific condition of payment."
The agreement for granting the money, in fact, only makes a "general
reference to the proper undertaking of public procurement."

According to the released documents, numbering some 636 heavily
redacted pages, officials also looked for ways to paint the
corruption scandal in a positive light. One official said: "This is a
really good story. The concern of Canadians over corruption is best
addressed when we can show that partners like Zambia are doing something
to address the problem."

"It is a sign of progress," he added.

The documents also highlight the dependency created by foreign aid
programs. In Zambia, one CIDA official warns that 40-55% of the
operational grants given to districts to deliver primary health
services are provided by the donors.
"Very basic health services are being affected," she says, adding
that "there is a very urgent need for funds in the sector."

Meanwhile, news coverage of the scandal in the African press detailed the
extent of medical services that would end if the aid transfers were cut.
The prospect of being blamed for letting Zambians die no doubt weighed
heavily on the mind of aid officials who argued in favour of restoring
funding on the grounds that the Zambian government was meeting conditions
laid down by the aid agencies to protect their funds.

CIDA´s Chief Financial Officer apparently remained unconvinced and
asked them to justify their confidence that more funds wouldn´t be
embezzled.

Of all the stiffed aid donors, Canada appears to be the most languid.

In Sweden, the Minister for International Development, Gunilla
Carlsson called for a debate over the role of development aid in the wake
of the corruption scandal in Zambia, asking, "could it be that the
development aid is not a part of a possible solution, but in fact

part of the problem?" Minister Carlsson subsequently fired the boss
of SIDA, the country´s aid agency, so that SIDA could "overcome its
high-profile business, economic and organizational shortcomings."

The Dutch Minister for Development Cooperation, Bert Koenders, was
also appropriately outraged calling "the misuse of Dutch taxpayers´
money...unacceptable."

Meanwhile, the Canadian government appeared to be relatively laid-
back about the criminal use of taxpayer funds saying only that "CIDA took
swift action once allegations surfaced" such as insisting that the stolen
money be put back into aid fund from which it was originally stolen,
rather than being returned to Canada, as Sweden demanded.

Download the documents obtained by Probe International here.
http://probeinternational.org/library/wp-
content/uploads/2010/12/Zambia-A-to-I.pdf

Brady Yauch, Probe International, January, 17, 2011.

Further Reading:

    * Zambia corruption scandal links back to Canada Nov 15th 2010
http://journal.probeinternational.org/2010/11/15/zambia-corruption-
scandal-links-back-to-canada/