Investigations into Yemen concluded
GIZ Management Board: ‘We have conducted a comprehensive and thorough review of the incidents in Yemen, taken appropriate action and significantly tightened our internal control system.’
GIZ has concluded its extensive investigations into financial irregularities in Yemen. The GIZ Management Board presented the final findings to the Supervisory Board yesterday. GIZ and its commissioning parties – the German Federal Foreign Office (AA) and the German Development Ministry (BMZ) – have agreed on the total amount that GIZ must pay as a result of the irregularities. For the years 2014 to 2024, the figure is around EUR 15 million. GIZ will settle any outstanding amounts with its commissioning parties as soon as possible.
Only a portion of the sum – around EUR one million – relates to actions that were classified as deliberate fraudulent activities carried out by a group of national staff. These included foreign exchange transactions and the manipulation of large-scale fuel orders.
The audits also revealed shortcomings in the exercise of commercial due diligence, including inadequate documentation of the process for obtaining comparative quotes and unaccounted for receipts for business travel and documents such as attendance lists for seminars. This resulted in non-recoverable costs amounting to around EUR 14 million.
Chair of the GIZ Management Board Thorsten Schäfer-Gümbel said: ‘One thing is clear: we encountered a situation in Yemen involving fraud that resulted in the loss of around EUR one million. It is also very frustrating that we have had to repay around EUR 14 million, including interest, because we failed to operate to the highest standards and because our project documentation in Yemen was incomplete. We have taken significant action as a result.’
Consequences: annual audits by the Finance Department
Among other things, GIZ has now tightened its control mechanisms for countries that are classified as medium or high-risk on account of the security situation or compliance risks. The annual audits of these offices – and thus also of commercial processes within projects – are to be carried out by the Finance Department in Germany and closely monitored by the Compliance Unit.
In recent years, GIZ has also significantly tightened the rules on rotation in key commercial positions. Managers receive compliance training to enable them to identify misconduct at an early stage. The whistleblowing system has already been improved and is in continuous development. Furthermore, the digitisation of all commercial and personnel files has been mandatory since 2023, leading to improvements in documentation and monitoring by Head Office in Germany.
Deputy Chair of the Management Board Ingrid-Gabriela Hoven explained: ‘The incidents in Yemen have highlighted weaknesses in the system. We’ve now learned from this experience. With the stricter rules that have been put in place, we’re ensuring that monitoring and management of our work – even in a fragile context – is comprehensive, now and in the years ahead.’
In mid-2022, GIZ received internal reports of financial irregularities in Yemen. GIZ immediately investigated these reports and commissioned an external audit firm to look into the incidents.
The findings of an initial special audit were available in May 2023 and confirmed the reports of irregularities. They involved transactions involving foreign exchange rates and the manipulation of bulk orders for fuel. GIZ informed the two commissioning parties – BMZ and AA – and the Supervisory Board of the report’s findings.
In 2023, GIZ took disciplinary action and terminated its working relationship with 24 national staff members in Yemen. GIZ subsequently commissioned two further audits – again carried out by an external firm of auditors. The commissioning parties and Supervisory Board were kept regularly informed of the progress of the audits. The period under review covers the years 2014 to 2024.
Given the security situation in Yemen from 2014 onwards, GIZ had to operate under what is known as ‘remote management’. This means that GIZ’s operational presence on the ground is only through local staff. In no other country where GIZ is active has this been the case for such a long period. Business trips to Yemen were only restored in 2022 in consultation with the German Government.