By Gabriela Baczynska, Michelle Nichols, Aaron Ross and Emma Farge
UNITED NATIONS/NAIROBI/GENEVA (Reuters) -The European Union executive has temporarily suspended funding for the World Food Programme (WFP) in Somalia, two senior EU officials told Reuters on Monday, after a U.N. investigation found widespread theft and misuse of aid meant to avert famine.
The European Commission gave more than $7 million in aid to the WFP's operations in Somalia last year, a fraction of the donations of more than $1 billion it received, U.N. data shows.
EU member states gave much more money on a bilateral basis. It was not immediately clear whether any would also suspend aid.
Balazs Ujvari, a spokesman for the European Commission, neither confirmed nor denied specifically a temporary suspension but said: "So far, the EU has not been informed by its U.N. partners of a financial impact on EU-funded projects.
"Nevertheless, we will continue to monitor the situation and abide by our zero-tolerance approach to fraud, corruption or misconduct."
The WFP did not immediately respond to requests for comment.
One senior EU official said the decision was taken after the U.N. investigation concluded that landowners, local authorities, members of the security forces and humanitarian workers were all involved in stealing aid intended for vulnerable people.
The official, who spoke on condition of anonymity, said the aid would be restored after the WFP met additional conditions, such as vetting of partners on the ground in Somalia. The second senior EU official confirmed that.
A third source, also an EU official, said the Commission was "cooperating actively with WFP to resolve systemic defects" but said no aid was suspended at this stage.
The July 7 report, marked "strictly confidential," was commissioned by U.N. Secretary-General Antonio Guterres, according to a copy reviewed by Reuters.
Its contents were first published on Monday by Devex, a media outlet focused on international development.
It cited internally displaced persons (IDPs) as saying they were coerced into paying up to half of the cash assistance they received to people in positions of power in the face of threats of eviction, arrest or de-registration from beneficiary lists.
Three months ago the WFP and the U.S. Agency for International Development (USAID) suspended food aid to neighboring Ethiopia in response to the widespread diversion of donations.
The European Commission contributes 10 million euros ($10.69 million) to Somalia and Ethiopia via the WFP, with the suspension covering part of that, according to one of the senior EU officials.
The United States is by far Somalia's biggest humanitarian donor. Last year, it contributed more than half of the $2.2 billion of funding that went to the humanitarian response there.
USAID spokesperson Jessica Jennings said in a statement the United States was working to understand the extent of the diversion and was "already taking steps to protect beneficiaries and ensure taxpayer money is used to benefit vulnerable persons in Somalia, as intended."
An official of the agency, speaking on condition of anonymity, said the situations in Ethiopia and Somalia were different and USAID was not planning to pause food assistance in the latter.
A U.S. Congressional source said the decision to suspend aid in Ethiopia was, in part, related to the uniquely hands-on role of the federal government there in distributing food assistance, which has long made donors uneasy.
"The widespread theft of food assistance in Ethiopia was abhorrent, but was also an opportunity to change the way it is provided," said the source, who spoke on condition of anonymity.
The Somali Disaster Management Office, which coordinates the government's humanitarian response, said in a statement on Monday that Somali authorities were committed to investigating the U.N. report's findings, while adding that current aid delivery systems operate "outside of the government channels".
Guterres' office did not immediately respond to requests for comment.
'WIDESPREAD AND SYSTEMIC'
Donors boosted funding to Somalia last year as humanitarian officials warned of a looming famine due to the Horn of Africa's worst drought in decades.
Famine was averted, official data shows, but as many as 43,000 people, half of them children younger than five, died last year as a result of the drought, researchers estimate.
The U.N. report did not attempt to quantify the amount of aid diverted but said its findings "suggest that post-delivery aid diversion in Somalia is widespread and systemic".
Investigators found aid diversion at all of the 55 IDP sites in Somalia from which they collected data, the report said. Some 3.8 million people are displaced in Somalia – one of the highest rates in the world.
Aid distribution has been a problem in Somalia for decades, complicated by weak government institutions, widespread insecurity stemming from an Islamist insurgency and marginalisation of minority clans.
Since revelations of aid theft during a 2011 famine, humanitarian agencies have converted most of their assistance to cash-based transfers that some officials have presented as less vulnerable to corruption.
The U.N. report was the latest evidence that cash-based systems can be exploited too. It identified a variety of perpetrators, led by so-called "gatekeepers," powerful individuals from dominant local clans.
These gatekeepers leverage their influence over access to camp sites and food beneficiary lists to coerce payments from IDPs, the report said.
Members of security forces also play a role by intimidating and sometimes arresting those who refuse to pay, while some humanitarian workers collude with gatekeepers to pocket stolen funds, the report said.
While famine has been averted for now, the report warned that inadequate humanitarian funding could imperil fragile progress.
Aid budgets are under strain globally, with just 36% funded to date of the $2.6 billion the U.N. says is needed this year for Somalia's humanitarian response.
($1=0.9355 euros)