The U.N. Development Program said in response to a news article on Monday it examined possible "misuse of funds" affecting almost US$100 million in Global Environment Facility-funded projects.
The Financial Times reported that a draft internal audit by UNDP in November found millions of dollars in "financial misstatements" among GEF-funded climate projects. The report, citing documents "seen" by the FT, said the draft internal audit showed indications of fraud at two country offices and suspected collusion among project managers at another unnamed country office.
Some US$7 billion of GEF funding has gone to projects managed by UNDP, according to the FT. As the United Nations' main anti-poverty agency, New York-based UNDP has an independent Office of Audit and Investigations that discloses internal audit reports on its website after they have been issued to management. The draft internal audit seen by the FT pertains to GEF-funded projects from 2018 and 2019.
“Issues identified by the audit could seriously compromise the achievement of the objectives of the audited entity,” the audit said, according to the FT's online report, which did not provide more specifics. UNDP has the diplomatic credentials and global reach to serve as a contractor in places other international organizations consider too dangerous or difficult.
In response to the report, UNDP released a statement acknowledging its audit and investigations office "received and investigated several allegations of misuse of funds related to projects financed by vertical funds, including some financed by the GEF. These complaints affect a fraction — some 1.4% — of UNDP’s GEF-funded project portfolio." That would be roughly equivalent to about US$98 million.
"OAI has found evidence of misconduct in several of these cases and identified the persons or parties responsible," UNDP said. "Information about all substantiated cases of misconduct is reported to UNDP’s executive board and updates on GEF-funded cases are shared with the GEF secretariat and council."
Final versions of confidential internal audits and investigations by the United Nations and other international organizations also routinely include responses to the findings from those who would have been responsible for any allegations of fraud, corruption or other misconduct.
704 projects in 137 countries
The GEF, as the world’s foremost international organization for financing environmental change, mainly provides grants and co-financing to countries that are developing or have so-called economies in transition, so that they can meet their legal obligations under international environmental treaties and agreements.
UNDP says its special unit with GEF "partners with environmental vertical funds to support countries with simultaneous eradication of poverty and significant reduction of inequalities and exclusion, by catalyzing environmental finance for sustainable development." The unit helps those nations improve management of ecosystems, climate programs, water resouces, clean energy and chemicals and waste. So-called vertical funds are development financing tools for a project focused in a particular area, with mixed public and private financial support.
The GEF says it has provided US$21.1 billion in grants and mobilized US$114 billion in co-financing for 5,000 projects in 170 countries, since its creation on the eve of the 1992 Earth Summit in Rio de Janeiro, a landmark event in the global environmental movement.
In its statement about the FT article, UNDP said it administers 704 GEF-funded projects that aid 74 million people among 137 countries. It said the projects are carried out through national and local programs or other organizations, and that they help to avoid or reduce 413 million tons of carbon emissions and affect 583 million hectares of land and sea — about the size of Argentina and Kazakhstan combined.
"UNDP takes all cases of financial mismanagement and other irregularities extremely seriously," UNDP said, "and works continuously to improve our oversight both to prevent instances of misconduct from occurring in the first place, and to rigorously pursue and resolve them when they do occur, including through recovery of funds, disciplinary sanctions against staff members up to and including dismissal and, in appropriate cases, further action in coordination with national authorities."
