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Originally published Tuesday, February 1, 2011 at 12:26 PM

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UW international AIDS nonprofit hit by financial questions in Mozambique

Health Alliance International, based at the University of Washington, took on U.S. government-funded work to expand treatment of people with HIV/AIDS in Africa. But it lost out on $100 million in funding last year and has cut its Seattle staff in half and its Africa staff to one-tenth its former size. An internal audit found financial problems. Its experience shows the difficulties in managing projects and money in a poor country thousands of miles away.

Seattle Times business reporter

Health Alliance International, a prominent nonprofit based at the University of Washington, grew tenfold over the past six years as it took on U.S. government-funded work to expand treatment of people with HIV/AIDS in Africa.

But it lost out on $100 million in funding it expected last year and has since cut its Seattle staff in half and its Africa staff to one-tenth its former size. An internal audit found financial problems that its director says possibly point to fraud by subcontractors.

Its experience shows the difficulties in managing projects and money in a poor country thousands of miles away.

Health Alliance Executive Director Stephen Gloyd said the alliance still is reviewing financial records from Mozambique with an accounting firm's help.

"Whether there was fraud or not, we don't know," he said. "Preliminary results suggest some of the organizations have serious problems and weak controls."

"No question it has been difficult," he said. But the organization is stable and continuing its work in Ivory Coast, Sudan and Timor-Leste, he said, and in Mozambique through a separate grant. "We have a broad grant portfolio and we remain a very solid organization." Gloyd also directs education and curriculum activities at the UW Department of Global Health.

Health Alliance International (HAI), which was begun in 1987 by North American doctors and nurses to support the fledgling government in Mozambique, has played a leading role in HIV treatment.

As the United States increased its support to fight AIDS around the world, the Seattle group became the main organization funded by the U.S. Agency for International Development (USAID) working in Mozambique.

It grew steadily to employ about 40 people at its Seattle headquarters last year and about 1,000 people in Mozambique, most through the Ministry of Health. Its budget was about $21 million in 2009 but will drop to about $7 million this year.

Focused on strengthening health systems of impoverished and fragile nations, it was awarded the Doris Duke Charitable Foundation's Africa Health Initiative grant, a seven-year $10 million program to help government-run health facilities use data to improve services. The UW departments of Global Health and Industrial Engineering are partners in that project.

All but 7 percent of its funding came from the U.S. government, and more than 90 percent of its work was in Mozambique, according to HAI's 2009 annual report. Gloyd said the alliance increased the number of people receiving antiretroviral drugs from about a couple dozen in 2003 to more than 50,000 this year.

In late 2009, the alliance applied for what would have been its biggest grant ever — $100 million in funding from USAID over the next five years.

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Early last year, its application was selected as the best technical proposal. But in the midst of the administrative review in June, a tipster reported problems in an organization employed by HAI.

One such program hired local community organizations in Mozambique for home-based nursing care and delivery of basic medical kits. The alliance did an internal audit and discovered irregularities.

"Their own accounting for those kits was quite inadequate, and that came back to bite us," Gloyd said.

HAI shared the findings with USAID and put forth a plan to resolve the issues. But at the end of August, USAID rejected the group's grant application.

Since the government agency had agreed with HAI's plan to correct the oversight of its subcontractors, the rejection came as a surprise, Gloyd said.

"It's still a bit of a mystery to us as to why this happened."

Last year, newly appointed USAID Administrator Rajiv Shah said he would embrace a results-oriented approach and an emphasis on accountability, including more rigorous monitoring and evaluation.

Recently one of the world's largest publicly funded health programs, the Global Fund to fight HIV/AIDS, TB and Malaria, said it had lost $34 million to corruption in four African countries, triggering at least one large donor to suspend funding.

One reason HAI ran into trouble may be that it started handling work that Gloyd says "wasn't our strong suit," such as construction.

HAI was working with contractors to build health clinics and hiring small nongovernmental organizations for home-based care. It has since decided to stop those projects. It now employs fewer than 100 people in Mozambique. Most of the nurses and technical staff whose work it was funding will be supported by other organizations, Gloyd said.

"Grants typically go up and down," he said. But when an organization expands so quickly, "we all need to be pretty careful of the kind of management systems we put in place."

Kristi Heim: 206-464-2718 or kheim@seattletimes.com

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