Donors freeze funding to NGOs over corruption

Sunday June 9 2019

South Sudan refugees gather at the El

South Sudan refugees gather at the Elegu refugees collection centre in Atiak Sub-county, Amuru District, in 2016. Last year, donors threatened to freeze funds to Uganda over allegations of fraud in refugee management. PHOTO BY JULIUS OCUNGI  

By STEPHEN KAFEERO

The Democratic Governance Facility (DGF), the largest pool of donor funding to non-governmental organisations in Uganda, has terminated funding to four NGOs after a forensic audit uncovered widespread rot and corruption.

Unsupported expenditure, outright theft, improper procurements and using the same documents to account to different donors, were some of the issues uncovered, according to sources familiar with the investigation. Some of the NGOs provided receipts dated before events had taken place, or for petroleum consumption tagged to license plates that turned out to belong to heavy-duty diesel trucks, which do not belong to the NGO fleet.

In at least one case, expenditure by an NGO involved in the human rights sector worth $272,000 (about Shs1b) in just one calendar year, could not be adequately defended.

“Unfortunately, the conclusions of the forensic confirmed incidences of fraudulent practices, governance issues, and forgery of accountability,” Swedish Ambassador Per Lindgarde said in a statement sent to this newspaper on Saturday morning in response to inquiries about the subject.

“Based on the findings and in light of the zero-tolerance principle, the DGF Board decided to terminate the partnership agreements with four existing organisations and not to enter into new partnership with two prospective partners,” Mr Lindgarde said.

DGF has not formally named the four NGOs. However, this newspaper has seen documents in which the accountability presented by several NGOs is questioned.

Background
Concerns about the lack of transparency and accountability in the CSOs are not new, but this is the largest forensic investigation and the first time details of the findings are being made public.

In October 2017, for instance, Swedish, Irish and British donors ended their funding to International Alert, a local NGO, after an investigation unearthed massive financial mismanagement. (See sidebar on previous findings in civil society organisations).

The latest scandal could not have come at a worse time for Ugandan civil society. The sector is already facing a slowdown in funding from weary foreign donors on the one hand, and a clampdown on their activities by the Ugandan government on the other.

In the case of the latter, the government has tightened legislation governing CSOs as it tries to regulate and in some cases restrict the activities of those involved especially in promoting governance and accountability.

In September 2017, security agencies raided and shut down the offices of Action Aid Uganda. The NGO had been involved in anti-corruption advocacy. It was later allowed back into operation but after the enforced replacement of Mr Arthur Larok, who had been the organisation’s chief executive in the country.

The latest scandal, however, is mostly about the internal challenges in the NGOs themselves. A Google search for “corruption in Uganda civil society” brings up several results of CSOs doing different anti-corruption activities in the country but hardly any about corruption within the organisations themselves.

The absence of evidence is not evidence of absence, civil society veterans told Sunday Monitor. Writing in an op-ed in this newspaper (see page 6), Dr Donald Rukare, a governance and human rights expert and an old hand in the sector, says the latest crisis is a wake-up call.

“It would appear that NGOs, who are meant to be one of the gate keepers of the communities they serve, are not immune from the governance and accountability affliction we see bountiful in the government rank and file,” Dr Rukare wrote in his personal capacity and not that of the organisation he leads in Uganda, Freedom House. “As a result of these concerns, there seems to be a looming crisis of confidence in Uganda civil society, which needs to be averted.”

The creation of DGF was meant to create a pool of funds from participating countries, including Austria, Denmark, the European Union, Ireland, Netherlands, Norway and Sweden.

Apart from having more impact through bigger grants, the facility was meant to reduce the effort and expense of accounting to several different donors sometimes over similar projects.

An unintended consequence, officials familiar with the industry told this newspaper, is that DGF has become very powerful and a slow down in funding from the facility affects almost all NGOs across the country. This newspaper has heard that several NGOs either caught up in the audits, or whose applications were submitted late have been forced to lay off staff or employ them at half or no pay because of the centralised nature of the funding.

Not new
Even here, the governance challenges are not new. The Independent Development Fund, a smaller facility set up under DGF to support smaller NGOs and help them build internal capacity before graduating into the bigger fund, was shut down a few years ago owing to concerns about governance in the grantee organisations.

The latest scandal has also brought the activities of DGF itself into sharp focus, with unsubstantiated reports of irregularities by some of the facility’s officials.

“The problem arises given the lopsided nature of donor funding because donors increasingly are manipulative and of course highly divisive and it is this issue of donor funding, the access to funding, which normally creates peer pressure and it raises those questions,” Livingstone Ssewanyana, the head of Foundation for Human Rights Initiative (FHRI), told Sunday Monitor.

In a statement to this newspaper, Ambassador Lindgarde hinted on the allegations about internal collusion at the funding facility: “As for corruption within the DGF itself, the Development Partners have reacted swiftly and intervened quickly when allegations of kickback were brought to our attention.”

Bad governance
Officials familiar with the donor and CSO industry, and who asked to speak on condition of anonymity in order not to jeopardise their relationships, revealed lopsided power dynamics between donors and grantees, sometimes complex reporting requirements, and genuine gaps in the governance of NGOs.

“On the one hand, you have donors who sometimes play God; they have the money and will make the applicants do whatever they want in order to get the funding. If there is a lack of scruples on that side, one cannot rule out a supply-side problem [with corruption],” a CSO leader told Sunday Monitor.

“On the other hand, some of the NGOs are brief-case operations set up primarily as money generating entities. The boards are filled with friends and associates and sometimes it is common for cross-representation boards. A clubby environment then occurs in which people take care of each other and cover for one another.”

Another official pointed to challenges with the “founder syndrome” in the industry, where NGOs lack clear succession plans and, in some cases, are synonymous with their founders.

“There have been a few cases where the founders were successfully transitioned out and new blood brought in, but in many cases, the same people have been at the helm for decades and are, for all intents and purposes, the NGOs themselves,” she said. “I am not sure this provides a very good foundation for institutional growth.”

“This governance is an induced factor,” FHRI’s Ssewanyana said. “Increasingly, civil society work has become some form of employment when it is supposed to be a service to humanity and because of the nature of our economies, now it is no longer possible to have pure voluntarism because the sector has also become professionalised.

“Much of the criticism the civil society is facing is largely externally induced. The governance frameworks are not enabled, facilitated to do their work yet because of the divisive nature of donor funding organisations that would provide peer oversight are undermined. The expertise that has been generated over the years within civil society is ignored due to the donor interests. What then is created is a cat-mouse game and it is this game that raises all these fundamental issues. The civil society we are talking about is caught between the donor on one hand, the government on the other and the community it is supposed to serve.”
Ms Sarah Bireete, the programme director at the Centre for Constitutional Governance, said: “The dominant perception of a crisis of governance and accountability in civil society, real or perceived, is a reflection of the brokenness that permeates the Ugandan body politics. This breakdown of institutions is manifest in all aspects of society. You see a dysfunctional Parliament, dysfunctional ministries, a judiciary that services the rich, etc. Civil society is, therefore, a victim of this breakdown rather than being the problem.”

Previous findings in civil society organisations

Donors have either slowed or stopped certain funding in response to high-profile corruption scandals
In 2005, for example, donors suspended $200m (Shs746b) in aid following an expose that officials at the health ministry had embezzled over $4.5m (Shs17b) from the Global Fund to fight HIV/Aids, Tuberculosis and Malaria.

In 2010, a group of donors providing direct budget support cut some funding after the 2007 Commonwealth Heads of Government Meeting (CHOGM) scandal, involving Shs6b (around $2.4m) and allegations against a former vice president and three government ministers. The donor cuts amounted to more than 10 per cent of their $360m (Shs1.3 trillion) in direct budget support at the time.

The 2012 Office of the Prime Minister (OPM) and another in the ministry of Public Service mess dubbed the pension scandal prompted several donors to cut funding to Uganda, which affected both government and also made it very difficult for CSOs to get money.

October 2017: The Swedish International Development Agency, the Democratic Governance Facility, Irish Aid and United Kingdom’s Department for International Development stop funding International Alert following a forensic audit which unearthed massive financial mismanagement.

In February 2018, allegations claiming that refugee operations in Uganda were inflating refugee numbers, stealing aid, and trafficking girls and women resulted in, among other things, donors threatening to withdraw aid from the same due to fraud or abuse.

The German government announced on May 24 that it was withholding Shs400b ($106m) of the funds it had promised Uganda for refugee resettlement annually.

Earlier, in 2018, the United Kingdom suspended its funding to the same cause after a UN investigation of Uganda’s refugee programme found evidence of corruption involving millions of dollar.

sdkafeero@ug.nationmedia.com

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