Liz Folsom, director of internal audit for CARE, the international relief organization, was named last week to replace William Taylor as auditor general of the Inter-American Development Bank (IDB), Insight has learned. Folsom is expected to begin her new job in July.

Folsom's selection came five months after the IDB began a search for a replacement for Taylor, who faced growing criticism for alleged failures by his office to dig into reports of corruption, including several incidents reported by Insight. One of these involved a longtime associate named Armando Namis, whose alleged involvement in a kickback scheme was referred to the U.S. Attorney's office in Washington for possible criminal prosecution after allegations of wrongdoing were reported by this magazine (see "Investigative Report: Corruption Corrodes Development Banks," and The Watchers.)

Other alleged lapses by the auditor general's office include failure to appropriately address claims of fraud lodged against the bank by two U.S. businessmen, as well as questionable payments made to prominent members of Chile's ruling coalition by the IDB-funded Fundacion Felipe Herrera (see "Business Gets Murky with IDB"; "Dissed and Dismissed"; "'Friends of Enrique' Enjoy Advantages" and "A Graveyard of Dreams").

Bank spokesmen were unavailable Monday morning for comment on the Folsom appointment. A spokesperson for CARE said Folsom would not comment until the IDB made an official announcement of her selection.

Folsom's selection may not mark the end of IDB service for Taylor, one of IDB President Enrique Iglesias' most trusted aides, insiders say. Instead, it is likely that Taylor, the former chairman of the board of the Institute of Internal Auditors and winner of its prestigious Bradford Dadmus Memorial award, may be allowed to stay on as a bank consultant.

Reliable sources say Folsom's selection may result in the reassignment of at least two of Taylor's most trusted lieutenants. According to one source, pressure for a significant restructuring of the auditor general's office came after several auditor-general investigators came forward to complain to senior bank officials about both its management and current auditing practices.

Martin Edwin Andersen is a contributing writer for Insight.