(January 17, 2011) Probe International obtains internal CIDA documents that show the aid agency failed to detect the fraudulent use of its funds in Zambia.

The recent corruption scandal inside Zambia’s Ministry of Health involving the theft of Canadian, Swedish and Dutch aid money caused Sweden’s minister for foreign aid, Gunilla Carlsson, to speculate that had a whistleblower inside the Zambian government not sounded the alarm, the fraud very likely would have continued unabated. Now, Probe International has learned from internal documents obtained through an Access to Information request that Canada’s aid agency, the Canadian International Development Agency (CIDA), was caught completely off guard by the corruption scandal and had no knowledge or ability to detect that its funds were being used inappropriately.

The documents paint a picture of an agency incapable of determining if and how its money is being used to line the pockets of corrupt officials. And while the documents obtained by Probe International relate to the Zambian corruption case, they also show that Canadian foreign aid programs in Kenya’s education sector have suffered a similar fate.

According to the documents, officials were initially unsure whether the Zambian corruption allegations were true and how much Canadian aid money had been subject to the fraud. In their early estimates, officials underestimated the amount of money stolen by more than half.

Eventually, CIDA determined that $880,000 of Canadian taxdollars were diverted by corrupt officials. In total, more than $7-million, including money from other donors such as Sweden and the Netherlands, was stolen.

The documents also show that Canadian aid officials never laid out strong procurement guidelines when they handed the money over. According to one email, an official said, “effective performance of public procurement is not an explicit condition of the CArr (Condition Agreement)…nor is it a specific condition of payment.” The agreement for granting the money, in fact, only makes a “general reference to the proper undertaking of public procurement.”

According to the released documents, numbering some 636 heavily redacted pages, officials also looked for ways to paint the corruption scandal in a positive light. One official said: “This is a really good story. The concern of Canadians over corruption is best addressed when we can show that partners like Zambia are doing something to address the problem.”

“It is a sign of progress,” he added.

The documents also highlight the dependency created by foreign aid programs. In Zambia, one CIDA official warns that 40-55% of the operational grants given to districts to deliver primary health services are provided by the donors.

“Very basic health services are being affected,” she says, adding that “there is a very urgent need for funds in the sector.”

Meanwhile, news coverage of the scandal in the African press detailed the extent of medical services that would end if the aid transfers were cut. The prospect of being blamed for letting Zambians die no doubt weighed heavily on the mind of aid officials who argued in favour of restoring funding on the grounds that the Zambian government was meeting conditions laid down by the aid agencies to protect their funds.

CIDA’s Chief Financial Officer apparently remained unconvinced and asked them to justify their confidence that more funds wouldn’t be embezzled.

Of all the stiffed aid donors, Canada appears to be the most languid.