Zenith Carex international limited has been blacklisted by global fund for an alleged $3 million fraud, ENigeria Newspaper reports
Zenit Carex was accused of falsifying invoices for the distribution of health goods to warehouses and health facilities across Nigeria on a regular basis.
Zenith Carex committed the fraud during a two-year period between 2017 and 2019, according to the Global Fund’s Office of the Inspector General (OIG), which released its newest report on March 9.
The finding comes after the OIG accused Nigerian companies and government agencies of misusing millions of dollars in Global Fund help in prior annual reports.
Over the years, the Federal Government has responded to some of the charges by authorizing investigations by the anti-graft agencies, the EFCC and the ICPC. Nigerian authorities have criticized the OIG’s findings in several cases, arguing that an independent committee should be formed to analyze its reports.
If the claims are not investigated, anti-corruption activists fear that similar donations to Nigeria would be halted indefinitely.
The Global Fund is a fundraising mechanism that pools the world’s largest financial gifts for AIDS, tuberculosis, and malaria prevention, treatment, and care.
Giving that Nigeria has the world’s greatest malaria prevalence (one in every four cases), the world’s fourth-largest tuberculosis load, and about two million people living with HIV, sponsoring programs to combat these dire statistics became a top priority for the Global Fund.
The Global Fund has disbursed almost $2 billion in Nigeria since 2003, but the country continues to suffer from alarming health statistics, owing in part to corrupt and inept authorities, according to health experts.
The Global Fund established the Office of the Inspector General to figure out why its investments aren’t yielding the same and much-anticipated effects (OIG).
Through audits, investigations, and consulting work, the OIG protects the Global Fund’s assets, investments, reputation, and long-term viability. Also see 5 Nigerian Banks That Open For Business On Saturday.
Chemonics International (Chemonics), who managed an integrated supply chain for Global Fund Principal Recipients in Nigeria and the United States Agency for International Development (USAID), allegedly inflated distribution invoices up to ten-fold and misrepresented the services executed, resulting in a $3 million overcharge.
Chemonics, a Washington-based international development corporation, has collaborated with the Global Fund on technical support and logistics projects in 12 countries.
Chemonics operates central and regional warehouses, long-haul distribution between warehouses, and last-mile distribution to 16,000 health facilities in Nigeria via third parties such as Zenith Carex, for both pharmaceutical and cold chain goods.
Chemonics accepted and paid “Zenith’s bogus invoices for almost two years,” according to the OIG investigation. The fraud resulted in over $3.4 million in non-compliant expenditures invoiced to the Global Fund when combined with Chemonics’ percentage-based contract management fees.”
“Chemonics’ controls were inadequately applied by inattentive employees who failed to notice major red flags while analyzing Zenith’s invoices. Despite significant budget overruns in the Global Fund contract, as well as a 75 percent contract ceiling increase for Zenith, the fraud went undetected due to insufficient financial monitoring in the local office and US-based Headquarters, as well as possible collusion between Chemonics and Zenith staff, according to the report.
Chemonics submitted a retroactive request for more cash and anticipated multi-million-dollar budget overruns on their fixed-price Global Fund contracts, prompting the Global Fund Nigeria Country Team to notify the OIG in April 2019.
The Country Team enlisted the help of the Local Fund Agent (LFA) to look into the possible causes of the overspend, which led to the discovery of a number of unsubstantiated subcontractor expenses.
“Because neither the LFA findings nor Chemonics’ assertions properly addressed the core cause or scope of the budget overruns,” the report concluded, “the OIG initiated a proactive investigation into suspected supply chain fraud.”
From 2017 to 2019, the OIG looked into nearly $20 million in third-party logistics provider costs to the Global Fund, analyzing paperwork for six main logistics providers, including Zenith. It claimed to have examined invoices and delivery documents.
According to the OIG, two field missions were performed to Chemonics’ Abuja office, during which it questioned several logistics providers and visited warehouses in Abuja and Calabar.
According to preliminary findings by the OIG, Zenith Carex, the major vendor of cold chain commodities — specialized, low-volume products such as HIV testing reagents – to 400 health facilities across Nigeria, was at the heart of the fraudulent overruns.
The report stated that “Zenith Carex supported investigators by attending interviews but supplied scant documentation in support of their statements.”
According to the OIG investigation, about $3,429,253 of Zenith’s distribution expenditures, including Chemonics’ associated management fees, were fraudulent and non-compliant.
According to the study, “this inquiry discovered a systemic invoicing fraud that drove up the cost of transporting specialty HIV cold chain commodities to and from warehouses in Abuja, Lagos, and Jos to 400 health facilities nationally.”
“Chemonics’ future bids for extra funds from the Global Fund were influenced by the fraud.” The supply chain’s financial sustainability in helping Nigeria’s fight against the three diseases was harmed by unsustainable expenses.
“Chemonics has now stopped cooperating with Zenith, taken administrative action against select workers, and improved controls and oversight over key Field Office activities,” says the statement. “The Office of the Inspector General and the Secretariat have agreed on management initiatives to improve project and risk monitoring in strategic, high-value, cross-portfolio suppliers like Chemonics.” The OIG advises that the Secretariat recover $3,155,514 and that the investigation findings be forwarded to Nigerian law enforcement authorities.
The Secretariat has ensured that Zenith no longer provides any service to Global Fund-supported initiatives in Nigeria as a result of the findings of this report.”
According to the OIG, the billing scheme began with Zenith’s first invoice to Chemonics in August 2017, which charged $33,953 for the transportation of 60,000 kilogrammes of supplies from Abuja to Jos.
According to the investigation, “Zenith exaggerated the charges tenfold: supporting evidence proved that only 6,009 kg of bundled commodities were delivered, which should have cost US$3,400.”
“By invoicing for vehicle tonnage (the gross weight of the trucks used to transport products), Zenith cheated the Global Fund of US$712,588, or 93 percent of the total expenses.”
Zenith verified charging Long Haul based on truck tonnage, stating that this reflected the vehicle quantities required to convey the commodities, according to the study.
“Zenith claimed in a 2017 discussion with a former Chemonics procurement specialist that they had verbal consent to charge by truck tonnage, but they could show no records or contract amendment to support this.”
The truck tonnage invoicing program was continued by Zenith until June 2019. Following the LFA’s examination, the company began billing in commodity weight rather than truck tonnage.
“However, the commodity weight charged continued to be fraudulently inflated by up to ten times,” according to the investigation.
According to the study, Zenith Carex also misrepresented the capacity of the trucks deployed, resulting in increased overcharging. According to the OIG, several charges exceeded the capability of Zenith’s fleet cars.
In a review of a separate throve of inflated invoices, Zenith Carex from May 2017 allegedly misrepresented its delivery practices and inflated invoices for a period of over two years, overcharging the Global Fund by $2,284,518, or 91 per cent of $2.6 million Last Mile Delivery (LMD) fees.