The tragedy is that while the goals of both are to help poor countries, together they could paradoxically make things worse.
What is going on in the world's battle against the AIDS pandemic illustrates the problem.
The dilemma in AIDS funding, as in many other types of aid, is ensuring sufficient oversight to maximally restrict fraud, while refraining from overloading recipients with cumbersome paperwork that restricts performance.
Limiting serious fraud is vitally important, especially now that the United States is embarking on a $15 billion worldwide AIDS program, and the Global Fund to Fight AIDS, Malaria and Tuberculosis also is increasing its efforts. In the next year, AIDS funding is expected to increase from $1 billion to $8 billion.
Further, there is evidence that better oversight is needed.
Previous HIV aid efforts have focused mainly on getting as much funding as possible to those most likely to be able to make a difference, with little regard for strict standards of accountability. The inevitable consequence has been poor oversight and fraud.
One of the early egregious abuses of funds for AIDS occurred in 1996 when then South African Health Minister, Nkosozana Dlamini-Zuma was reprimanded by the Auditor-General for spending $2 million on a play without coherently accounting for the expenditures. The current Auditor-General is investigating allegations made by the Sowetan newspaper, that a major AIDS group, the National Association of People Living with AIDS (NAPWA), has not paid staff and been forced to close several offices even though sufficient funds for these agreed allocations were previously released.
Kenya's National AIDS Control Council has witnessed several abuses and only investigative journalism has uncovered most of them. Nicole Itano, a South African writer, describes how 'the council's director, Margaret Gachara, was removed from her position after she used faked documents to garner a salary almost seven times above the norm for someone in her position.' In August 2003 the Kenyan Government, under pressure to act from its own finance officials, cut funding to four AIDS organizations alleging fraud and is investigating 10 others.
Fatima Hassan an attorney with the Johannesburg-based AIDS Law Project who filed requests with the SA Attorney-General requesting investigations into AIDS finances notes, "There are groups meeting their objectives and those that are not, but no one is holding them accountable.". According to Hassan, the South African Government simply does not have the appropriate systems in place to prevent fraud.
Hassan says current investigations may be touching just the tip of the iceberg. Indeed, disability grants in South Africa have increased by 32% in the past year, and while HIV maybe the cause of much of this, the South African Department of Social Welfare believes fraud is another.
But in confronting these cases of abuse, major government donors are engaging in reactionary practices that are massively wasteful.
Giant aid agencies, such as the U.S. Agency for International Development USAID, are so worried about bad publicity from small scale fraud that they are employing huge beltway contractors to do much of their "giving" instead of taking a chance on organizations based in affected countries.
These contractors may provide useful educational materials, and some educational workshops make sense. But how much is going for such activities rather than in country aid? Probably way too much. Figures are uncertain as U.S. AID is obsessively stingy with releasing any information relating to contract proposals, terms or budgets. When it was forced to reveal this information about its malarial control programs, though, allocations were found so appalling that Sens. Gregg and Feingold called for a General Accountability Office investigation.
Indeed, according to insiders and scholars who have studied this issue closely, only a few cents of every aid dollar ends up in the hands of the countries and people that need aid the most. The vast majority of USAID (taxpayer) funding never leaves the United States. One USAID employee, who prefers anonymity to losing his job, explains that the preference for big contractors results from a focus on "getting the job done, not getting the job done right."
It is a perverse betrayal of HIV sufferers to spend most of an AIDS budget on these types of activities, mostly because the big contractors are easier to monitor and have sophisticated accounting techniques -- not to mention entrenched Washington interests.
The overzealous attack on abuse also does little to encourage accountability in those local organizations that can and are actually doing thins to fight the AIDS pandemic.
For example, the Treatment Action Campaign in South Africa, which tries to increase generic drug distribution to those with HIV, rarely discusses funding abuses in order "to avoid creating confusion or further disunity among people with HIV/AIDS and the organizations that represent them"
There is a balance between counterproductive accounting controls and resource draining fraud. A privately-funded South African organization has found it.
The South African Sibambisene AIDS Network, funded by drug company Bristol Myers Squibb and the Nelson Mandela Children's Fund, helps distribute money to 30 or so small organizations addressing the AIDS pandemic in South Africa.
PhaPhamini, an orphan support group in the beautiful location of Hluhluwe, is what most are like. It reportedly does a great job of protecting AIDS orphans and educating people about the dangers of AIDS. And it operates on only a few thousand dollars a year.
As Nicole Itano explains: 'PhaPhamini is run by a woman who speaks no English and has no computer skills"' The woman is typical of the people doing much of the essential compassionate caring work. They are not trained professionals and are unlikely to care about filing reports on time. Some have trouble appreciating the separation of work from home life, since they have never held a job before. Many used work cell phones for personal calls without apparently knowing that such a practice was inappropriate.
Unfortunately, three of the 16 other orphan networks Sibambisene supports couldn't account for how they had spent most their funds. Anthony Mkhabela, Sibambisene's network's project manager, suspects that the money was used privately by the organisation's leaders.
What to do? Demand more paperwork from operations such as PhaPhamini? It would make no sense.
Instead, Sibambise tacitly accepts that a small amount of abuse, such as using money for cell phones, may occur, but uses its own funding structure and distribution systems to ensure as little aid as possible is wasted. - less than a month's worth of money granted to any organization.
The losses from the embezzlement by the three guilty orphan agencies thus amounted to less than a thousand dollars. Furthermore, the guilty are now repaying the missing funds, and the local organization responsible does not receive monthly distributions any more.
Finally, learning from the past, Sibambisene helps small organizations account for money responsibly and provides basic training in banking and accounting.
This makes far more sense than what USAID is doing in hiring huge contractors to watch over its giving.
As one Beltway consultant who also declined to be named because of the risk of future contracts being withdrawn, said, "Paying USAID funded consultants, doing work of marginal value, more per week than was stolen in an entire year by the private Sibambisene groups is a poor allocation of resources."
Fraud will happen. Efforts need to be made to limit it. But overly zealous efforts to eliminate it will only waste more aid than is saved. USAID officials may be able to say that taxpayer funds are not embezzled, but they also won't likely be able to say that they did much good - except for contractors.
Dr Roger Bate is a fellow and Ben Schwab a researcher at the American Enterprise Institute.