Report on cases of financial irregularities in 2016

1. Introduction

The Foreign Service Control Unit deals with cases involving breaches of rules in the Foreign Service, unless responsibility for following up a specific type of irregularity has been assigned to a different unit in the Ministry of Foreign Affairs. The Foreign Service Control Unit also oversees such cases in subordinate agencies.

The Ministry publishes quarterly reports in Norwegian on cases involving financial irregularities listing cases that have been closed after appropriate measures have been implemented (see regjeringen.no only in Norwegian).

2. Zero tolerance

The Ministry has zero tolerance for financial irregularities and other misuse of Ministry funds. This applies to all Foreign Service employees, suppliers of goods and services, and organisations and others that manage funds allocated by the Ministry.

Misused funds must be repaid to the Ministry. The same applies in cases where there is no documentation that funds have been used in accordance with the relevant agreement. The matter may be reported to the police if it is likely that a criminal offence has been committed.

3. Dealing with cases of financial irregularities

Most of the cases dealt with by the Foreign Service Control Unit have to do with possible misuse of grant funds. Suspicion of financial irregularities is normally reported to the Foreign Service Control Unit by the unit responsible in the Foreign Service or by the organisation that has received the funds. If the Foreign Service Control Unit finds reason to investigate the matter more closely, it is registered as a case.

As a rule, further disbursements to the final recipient are stopped until the case has been investigated and adequate risk-reducing measures have been implemented.

Investigations are normally carried out by the Foreign Service Control Unit, in close cooperation with units involved in the Foreign Service. In some cases, external expertise is commissioned to investigate a case or perform a special audit. The Ministry of Foreign Affairs has framework agreements with five different companies for such services. Additionally, the Foreign Service Control Unit hires external legal services to follow up legally complex cases. If the organisation that has received the grant initiates its own enquiries, the Foreign Service Control Unit normally waits until the results are available before considering further measures.

In most cases of financial irregularity, the grant recipient agrees to repay the misused funds. If, however, the Foreign Service Control Unit's claim for repayment is contested, legal proceedings may be initiated to recover the funds.

A case is closed if the investigation concludes that nothing has happened that requires a response from the Ministry. In cases where the Ministry claims reimbursement, the case is not closed until the funds have been repaid.

Information on cases that have been closed after appropriate measures have been implemented is published quarterly on the Ministry website.

4. Trends in the number of cases since 2007

Since 2007, the Foreign Service Control Unit has registered 890 cases and closed 745 cases. In 337 of the closed cases measures were implemented, most often claims for the repayment of funds. A total of NOK 83.5 million has been repaid during this period. These figures include cases involving funding managed by Norad, FK Norway and Norfund.

The number of new cases rose steadily until 2015, but was lower in 2016. This is probably partly because the Foreign Service Control Unit has raised the bar somewhat for registering cases; clearer signs of financial irregularity are now required before a case is registered. In addition, there is naturally some variation in the number of cases from year to year. It is therefore not possible to draw any conclusions regarding other reasons for the drop in the number of new cases from 2015 to 2016.

5. Cases dealt with in 2016

In 2016, the Foreign Service Control Unit registered 94 new cases and closed 138 cases. Measures were implemented in 57 cases: in 56 cases repayment of funds was required, and in one case an employee was dismissed. A total of NOK 7 185 527 was repaid in 2016. In 56 of the cases, funding had been allocated under programme area 03 ­– international development assistance. The figures include cases involving funding managed by Norad, FK Norway and Norfund.

Cases dealt with in 2016
	New	Closed (total)	Closed, measures taken	In progress 31 Dec 2016
Ministry	69	88	24	119
Norad	24	36	33	19
FK Norway	1	2	0	2
Norfund	0	12	0	5
	94	138	57	145

Norad implemented measures in a much higher proportion of cases than the Ministry. This is probably largely because they have had different practices for registering cases. The Ministry previously registered most cases as they were received, whereas Norad conducts some preliminary investigations before registering a case.

All Norfund's cases were closed without any measures being implemented. However, all these cases are related to investment activities. This means that it is not appropriate to require repayment to Norfund, as it would be if grant funds were involved. In several of these cases, the companies involved have initiated some type of legal action.

5.1 Types of irregularity

Most of the cases that were closed in 2016 after measures were implemented involved embezzlement. Only two involved corruption, and four were cases of theft. The category 'Other' includes inadequate reporting and funds used for purposes other than those covered by the agreement.

It should be noted that the figure shows the types of irregularity that were brought to light, but does not necessary reflect the relative scale of the problems in reality. This is partly because some types of irregularity are easier to detect than others. There is reason to believe, for instance, that it is often more difficult to prove that corruption has occurred than embezzlement or theft.

5.2 Type of organisation/grant recipient

In 2016, 42 of 57 cases involved Norwegian non-governmental organisations (NGOs). In most of these, the NGO's local partner was responsible for the irregularities, but in a few cases, the local employees of the Norwegian NGO were involved.

It cannot be concluded from these figures that Norwegian NGOs are more susceptible to financial irregularities than others. Experience has shown that the Norwegian NGOs have good systems for detecting and reporting possible irregularities. Other recipients of Norwegian support have systems of more varying quality.

Support channelled through multilateral organisations is provided largely as general contributions and softly earmarked thematic funding in the long-term plans to which Norway gives highest priority. These organisations have independent internal audit systems or investigative units, and the Foreign Service Control Unit will only register reports of irregularities as cases if they involve projects funded by Norway. In the governing bodies of UN agencies, Norway has worked to ensure that internal auditing systems are independent, have sufficient capacity, including capacity for dealing with financial irregularities, and that there is greater transparency as regards their activities. The major UN agencies publish information about financial irregularities and include it in reports to the governing bodies.

5.3 Geographical distribution

In 2016, Uganda was the country with the largest number of cases in which measures were implemented. In previous years too, Uganda and Malawi have been among the countries where the largest numbers of cases have been registered by the Foreign Service Control Unit.

There may be a number of factors that explain the differences between countries. One factor is differences in crime levels, and another is probably the scope of Norwegian support and the way it is organised. A third important factor is variations in how easy it is to control the use of funds. It may be particularly difficult to detect financial irregularities in countries affected by crisis and war.

More information on individual cases is available in Norwegian in the quarterly reports on the Government website.