Report on cases of financial irregularities in 2017

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 were implemented (see regjeringen.no).

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 suspected 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 of suspected financial irregularity.

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 specialised 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 (in Norwegian only).

4. Trends in the number of cases since 2007

Since 2007, the Foreign Service Control Unit has registered 991 cases of financial irregularities and closed 853 cases. Measures were implemented in 381 of the closed cases – most often claims for the repayment of funds. A total of NOK 96.5 million has been repaid during this period. These figures include cases involving funding managed by Norad, FK Norway and Norfund, in addition to the Ministry.

The number of new cases rose steadily until 2015, but was slightly lower in 2016 and 2017. 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.

5. Cases dealt with in 2017

In 2017, the Foreign Service Control Unit registered 101 new cases and closed 108 cases. Measures were implemented in 44 cases: in 43 of them repayment of funds was required, and in one case an employee was dismissed. A total of NOK 13 066 320 was repaid in 2017. In 43 of the cases that were closed after measures were implemented, funding had been allocated under programme area 03 – international development assistance. The figures include cases involving funding managed by Norad, FK Norway and Norfund, in addition to the Ministry.

Norad implemented measures in a higher proportion of cases than the Ministry. This is probably largely because Norad and the Ministry have had different practices for registering whistleblowing cases. The Ministry has tended to register most cases as they are 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 or implemented other measures.

In 2017 it was decided that the Ministry would not continue to monitor cases of financial irregularities in Norfund, which is a state-owned enterprise. Instead, Norfund is required to inform the Ministry about cases the Ministry ought to be aware of. This change is being implemented to bring practice in line with the way cases of financial irregularities are dealt with by other state-owned enterprises.

5.1 Types of irregularities

About half of the 44 cases that were closed in 2017 after measures had been implemented involved embezzlement. Six cases 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 number of cases of the various types of irregularity that were brought to light and in which measures were implemented. However, this 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 (agreement partner)

In 2017, 27 of the 44 cases in which measures were implemented 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.

None of the cases that were closed in 2017 after measures had been implemented involved multilateral organisations. Support channelled through multilateral organisations is provided largely as general contributions or 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 cases of irregularities 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 Geography

In 2017, Malawi and Uganda were the two countries with the largest number of cases in which measures were implemented. Likewise, they topped this list in 2016, and in previous years they have also been among the countries with many cases registered by the Foreign Service Control Unit. [i]

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.

For more information in Norwegian on individual cases that were closed in 2017 after measures had been implemented, see the Government website (regjeringen.no).

[i] Eleven other countries, in addition to Botswana, had one case in which measures were implemented in 2017.