Foreign aid ripped off

By STEVE LEWIS in the Herald Sun

AUSTRALIA'S $4 billion foreign aid program is plagued by fraud, with 134 "active" investigations into possible corruption in 16 countries.

Most cases of fraud are in Indonesia and Papua New Guinea, who jointly receive $740 million a year in Australian aid.

A Herald Sun investigation can reveal that at least $100,000 in taxpayers' money has been "misused" - and possibly siphoned off - on one project in PNG's overflowing jails.

Millions of dollars are being illegally used by corrupt officials, with AusAID revealing 68 cases of "alleged, suspected or detected" fraud investigated in the past year.

Adding to the problems for AusAID, its head Peter Baxter conceded that many of the countries receiving Australian money didn't have sufficient legal and police grunt to properly pursue alleged fraud.

The peak aid agency - which will see its budget double to nearly $8 billion by 2015 - would not comment on particular cases of fraud while investigations continued.

But the Herald Sun can reveal that the flagship $160 million PNG Law and Justice Sector Program is under serious scrutiny after the misuse of funds.

Documents seen by the Herald Sun show PNG's Department of Correctional Services is investigating a $200,000 contract to supply vital radio equipment to prisons.

An investigation by the department's internal auditor, Wailyo Pindao, has uncovered "serious weaknesses" with the project, which has been backed by AusAID since 2003.

Mr Pindao said he wanted Aarons Security Service, the firm contracted to supply repeater equipment, formally investigated.

And he said it was possible some money had been stolen or siphoned off by corrupt government officials.

Radio equipment purchased for the jails did not comply with PNG standards. This caused a "total breakdown of the entire radio communication system", Mr Pindao wrote.

The faulty equipment meant that radio coverage was restricted to 10m. This was leading to "great risk in the movement of prisoners".

Inquiries to the PNG Investment Promotion Authority showed that Aarons Security Service has not filed an annual return for two years.

The company would be deregistered within months, a spokeswoman said.

Phone numbers for Thomas Waim, Aaron's principal director, have been disconnected.