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entitled 'Global Health: Global Fund to Fight AIDS, TB and Malaria Has 
Advanced in Key Areas, but Difficult Challenges Remain' which was 
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Report to the Honorable Jim Kolbe Chairman, Subcommittee on Foreign 
Operations, Export Financing, and Related Programs, Committee on 
Appropriations, House of Representatives:

May 2003:

Global Health:

Global Fund to Fight AIDS, TB and Malaria Has Advanced in Key Areas, 
but Difficult Challenges Remain:

GAO-03-601:

Letter:

Results in Brief:

Background:

The Fund Has Established Key Governance Structures, but Implementation 
Challenges Impede Ability to Rapidly Disburse Funds:

The Fund Developed Comprehensive Oversight Systems and Issued 
Procurement Guidance, but Systems Face Challenges, and Guidance Is 
Still Evolving:

Lack of Resources Threatens Fund's Ability to Continue to Approve and 
Finance Grants:

Improvements in Grant-Making Processes Enhance Fund's Ability to 
Achieve Key Objectives, but Challenges Remain:

Agency Comments and Our Evaluation:

Appendixes:

Appendix I: Objectives, Scope, and Methodology:

Appendix II: Status of Round 1 Grants:

Appendix III: Drug Procurement Cycle:

Appendix IV: Indicators of Need for Recipient Countries:

Appendix V: Comments from the Global Fund to Fight AIDS, TB and
Malaria:

Appendix VI: Joint Comments from the Departments of Health and Human
Services and State, and the U.S. Agency for International
Development:

Appendix VII: GAO Contact and Staff Acknowledgments:

GAO Contact:

Staff Acknowledgments:

Tables:

Table 1: The Secretariat's Budget for 2003:

Table 2: Signed Grant Agreements--Funds Committed and Disbursed:

Table 3: Grant Agreements in the Pipeline:

Table 4: Grant Agreements Pending, but Less Far Along in the Process:

Figures  :

Figure 1: Timeline of the Fund's First Year:

Figure 2: Approved Grants, by Disease and by Region:

Figure 3: Governance Structure of the Fund as of April 1, 2003:

Figure 4: The Structure of the Fund's Board as of April 1, 2003:

Figure 5: Anticipated Grant Expenditures for Drugs and Health Products:

Figure 6: Anticipated Expansion in Approved Proposal Dollars through 
2004 (actual and estimated 2-year commitments):

Figure 7: Pledges Made, Amount Received, and Grant Proposals Approved:

Figure 8: Global Fund Proposal Review Process:

Figure 9: Grant Money by Country Income Level:

CCM: Country Coordinating Mechanism:

HIV/AIDS: Human immunodeficiency virus/acquired immunodeficiency 
syndrome:

LFA: Local Fund Agent:

NGO: Nongovernmental organization:

OECD: Organization for Economic Cooperation and Development :

TB: Tuberculosis:

TRP: Technical Review Panel:

UN: United Nations:

UNAIDS: Joint U.N. Program on HIV/AIDS:

UNDP: U.N. Development Program:

UNOPS: U.N. Office for Project Services:

USAID: U.S. Agency for International Development:

WHO: World Health Organization:


Letter May 7, 2003:

The Honorable Jim Kolbe
Chairman, Subcommittee on Foreign Operations,
   Export Financing, and Related Programs
Committee on Appropriations
House of Representatives:

Dear Mr. Chairman:

By the end of 2002, more than 40 million people worldwide were living 
with human immunodeficiency virus/acquired immunodeficiency syndrome 
(HIV/AIDS), with 5 million newly infected that year. HIV/AIDS, along 
with tuberculosis (TB) and malaria, causes nearly 6 million deaths per 
year and untold human suffering. In addition, these diseases, if 
unchecked, are increasingly seen as a threat to economic growth, with 
the potential to worsen conflict and political instability in many 
parts of the world. According to the United Nations (U.N.), about $10 
billion will be needed in 2005, increasing to $15 billion in 2007, to 
fight AIDS alone; malaria and tuberculosis will require billions more. 
In January 2002, the Global Fund to Fight AIDS, Tuberculosis and 
Malaria ("the Fund") was established in Geneva, Switzerland. The Fund 
aims to rapidly disburse grants to augment existing spending on the 
prevention and treatment of these three diseases in developing 
countries while maintaining sufficient oversight of financial 
transactions and program effectiveness.

As of April 1, 2003, the United States had pledged $1.65 billion to the 
Fund[Footnote 1] and is the single largest donor. Because of this 
significant commitment of U.S. resources, you requested that we report 
on the Fund's progress during its first full year of operation. This 
report assesses (1) the Fund's progress in developing governance 
structures; (2) the systems that the Fund has developed for ensuring 
financial accountability, monitoring and evaluating grant projects, and 
procuring goods and services; (3) the Fund's efforts to mobilize 
resources; and (4) the Fund's grant-making processes.

:

As part of our review, we analyzed documents and interviewed key 
officials from the Fund; the Joint U.N. Program on HIV/AIDS (UNAIDS); 
the World Health Organization (WHO); the U.N. Development Program; and 
experts on project implementation and procurement. We obtained 
perspectives on the progress and evolution of the Fund from officials 
at the Department of State, the U.S. Agency for International 
Development, and the Department of Health and Human Services, as well 
as the directors of the Global Business Coalition on HIV/AIDS, the 
Earth Institute of Columbia University, the Gates Foundation HIV/AIDS 
and TB Program, and the Global AIDS Alliance. We also conducted 
research and reviewed data on global spending on HIV/AIDS, TB, and 
malaria. In addition, we visited Haiti, Honduras, Ethiopia, and 
Tanzania to meet with principle recipients of Fund grants and members 
of the country coordinating bodies that will be implementing activities 
supported by Fund grants.[Footnote 2] In Haiti and Tanzania, we also 
met with the private sector firms that have contracted to serve as 
local agents for the Fund in these countries. (App. I provides a more 
detailed description of our objectives, scope, and methodology.):

Results in Brief:

The Fund has made noteworthy progress in establishing essential 
governance and other supporting structures and is responding to 
challenges that have impeded its ability to quickly disburse grants. In 
its first year of operation, the Fund successfully established a board 
of directors, a permanent secretariat, and a grant review process. It 
called on countries to establish governance structures to develop, 
implement, and oversee grants. The principal country-level governance 
structure, the Country Coordinating Mechanism (CCM), is designed to 
provide a forum for all stakeholders to (1) review and submit proposals 
and (2) follow the progress of Fund-supported programs. However, as of 
late 2002, in three of the four countries we visited there was limited 
communication between the secretariat and the CCM and between CCM 
leadership and other members. These communication problems and the 
evolving nature of the country-level structures resulted in key 
participants being unsure of their roles in the proposal process and 
unprepared to support grant implementation. In one country, the CCM was 
better prepared largely because it had received a high level of support 
from Fund staff and strong leadership from the CCM chair; however, the 
Fund does not have sufficient resources to provide this level of 
support to all CCMs. The Fund has acknowledged the difficulties 
experienced by CCMs and is addressing them by clarifying its guidance 
to CCMs through regional workshops and working with local partners such 
as bilateral and multilateral donors. At the headquarters level, to 
benefit from some of the tax and employment advantages of an 
international organization, the secretariat of the Fund has relied on 
the regulations and systems governing the U.N. WHO. However, this 
administrative relationship has contributed to delays in disbursing 
grants and uncertainties for Fund staff concerning responsibility and 
accountability. The Fund is exploring the possibility of gaining 
additional concessions from Swiss authorities that would eliminate the 
need for this relationship.

The Fund has developed comprehensive oversight systems for monitoring 
and evaluating grant performance and ensuring financial accountability 
and has issued guidance for procurement; however, the oversight systems 
face challenges at the country level and some procurement issues have 
not been finalized. The Fund has recognized these challenges and is 
working to address them. The Fund's principal oversight entity at the 
country level, the Local Fund Agent (LFA), is a Fund contractor that is 
responsible for ensuring that grant recipients account for the money 
they spend and measure progress they make in fighting disease. The LFA 
is also responsible for assessing recipients' ability to procure goods 
and services. However, the introduction of this new mechanism has been 
marked by controversy and misconceptions regarding its oversight role. 
These problems have delayed the designation of LFAs in some countries, 
slowing the implementation of grants. For example, several government 
officials in one of the countries we visited believed, incorrectly, 
that a government ministry would be permitted to perform the LFA 
functions. Moreover, in countries with a limited number of qualified 
personnel and organizations, LFAs will face the challenge of 
maintaining the independence necessary to avoid real or perceived 
conflicts of interest. Regarding procurement, the Fund has provided 
requirements in the agreements that each grant recipient must sign. 
These requirements are focused primarily on procurement of drugs and 
public health products in an effort to ensure quality, safety, and the 
lowest possible prices. The agreements also contain general but less 
extensive requirements on procuring goods and services, including 
nonmedical items such as vehicles and office equipment. The Fund 
encourages recipients to abide by national laws and international 
obligations but does not explicitly address this issue in the grant 
agreements.

A lack of sufficient resources threatens the Fund's ability to approve 
and finance additional grants. Although the Fund has announced plans to 
award new grants in its third round of proposals in October 2003, 
pledges made through this year as of April 1, 2003, are insufficient to 
cover more than a small number of additional grants. The Fund has less 
than $300 million to support commitments in round 3--significantly less 
than the $608 million in 2-year grants approved by the board of 
directors in the first round and the $884 million approved in the 
second round. On the basis of the number of technically sound proposals 
it expects to receive and approve in future rounds, and the amount 
pledged as of April 1, 2003, the Fund projects that it will require 
$1.6 billion in new pledges in 2003 and $3.3 billion in 2004. In 
addition, without significant new pledges, the Fund will be unable to 
support all of the already approved grants beyond the initial 2-year 
agreements. If all currently approved grants demonstrate acceptable 
performance after 2 years, the Fund will require $2.2 billion more to 
assist these programs for an additional 1 to 3 years. These grants seek 
to provide, among other things, AIDS medications to 500,000 people and 
care and support to 500,000 AIDS orphans and other vulnerable children.

Improvements in the Fund's grant-making processes have enhanced its 
ability to achieve its key objectives, but challenges remain. Grant 
decisions are made by the board, based primarily on a technical 
evaluation of submitted proposals. Between the first and second 
proposal rounds, the Fund made several improvements and adjustments to 
its proposal review and decision-making process. These include revising 
the application materials, altering eligibility criteria to focus on 
the most needy countries, and adding additional members to the 
technical evaluation panel to increase its overall knowledge base and 
better prepare it to evaluate nonmedical, development-related issues. 
However, ongoing challenges to the grant decision process have been 
identified by the Fund and stakeholders, including ensuring that grants 
augment existing spending on HIV/AIDS, TB, and malaria and that 
recipients have sufficient capacity to effectively use the grants. The 
Fund has recognized these challenges, but its efforts to address them 
are still evolving.

In responding to our draft report, the Fund, the Department of Health 
and Human Services, the Department of State, and the U.S. Agency for 
International Development (USAID) agreed with our findings. The Fund 
discussed steps it is taking to address the challenges identified in 
our report and identified several additional challenges.

Background:

HIV/AIDS, TB, and malaria, three of the world's deadliest infectious 
diseases, cause tremendous human suffering, economic loss, and 
political instability. According to UNAIDS, in 2002 AIDS caused 3 
million deaths, and 5 million people became infected. More than 70 
percent, or 28.5 million, of the 40 million people with HIV/AIDS 
worldwide live in sub-Saharan Africa. However, according to a report by 
the National Intelligence Council, HIV infections in just five populous 
countries--China, India, Nigeria, Russia, and Ethiopia--will surpass 
total infections in central and southern Africa by the end of the 
decade. In addition, Thailand, a developing country that had 
successfully countered the growth of AIDS in the 1990s, is now facing a 
resurgent epidemic. According to WHO, after HIV/AIDS, TB is the world's 
leading infectious cause of adult mortality, resulting in as many as 2 
million deaths per year. Like HIV/AIDS, tuberculosis primarily affects 
the most economically active segment of the population, with 75 percent 
of the annual deaths occurring in those between the ages 15 and 54. 
Conversely, malaria, which causes more than 1 million deaths and at 
least 300 million cases of acute illness each year, is a leading cause 
of death in young children. The disease exerts its heaviest toll in 
Africa, where about 90 percent of malaria deaths occur.

The Fund was formally launched in January 2002. The Fund is a grant-
making organization with the purpose of attracting, managing, and 
disbursing funds that will increase existing resources and make a 
sustainable and significant contribution to the reduction of 
infections, illness, and death. The Fund aims for an integrated and 
balanced approach, covering prevention, treatment, care, and support, 
and seeks to establish efficient and effective disbursement mechanisms. 
During its first full year of operation, the Fund successfully 
completed two proposal rounds and began distributing grant money.

Figure 1: Timeline of the Fund's First Year:

[See PDF for image]

[End of figure]

Over the course of these two proposal rounds, the Fund approved grants 
to 153 proposals in 81 countries across the major regions of the world 
(see fig. 2).[Footnote 3] These grants total nearly $3.7 billion ($1.5 
billion over the first 2 years) and cover all three diseases.

Figure 2: Approved Grants, by Disease and by RegionA:

[See PDF for image]

[A] Based on maximum allowable grant money for the full length of 
board-approved programs.

[End of figure]

The Fund Has Established Key Governance Structures, but Implementation 
Challenges Impede Ability to Rapidly Disburse Funds:

In its first year, the Fund developed and established key governance 
and other supporting structures, including a board of directors, a 
permanent secretariat, a grant review process, and country-level 
structures required to develop, implement, and oversee grants. However, 
limited communication, administrative complications, and the evolving 
nature of these new structures, especially at the country level, led to 
a lack of clarity over roles and responsibilities and slowed the Fund's 
ability to sign the initial grant agreements. The Fund has recognized 
these problems and is taking steps at both the country and headquarters 
levels to address them.

Key Governance and Other Supporting Structures Established:

The Fund has made noteworthy progress in establishing key headquarters 
and country-level governance structures. Figure 3 illustrates the 
governance structure of the Fund.

Figure 3: Governance Structure of the Fund as of April 1, 2003:

[See PDF for image]

Notes: WHO and UNAIDS assist the technical review panel with data and 
other expertise. The Fund has entered into an agreement with WHO for 
the provision of administrative services at the headquarters level.

The arrows denote relationships but do not specify their nature, e.g., 
information or money flow vs. accountability. The relationships among 
the components of this governance structure are detailed below in the 
paragraphs on each component.

[End of figure]:

At the headquarters level, governance structures include a board of 
directors, a permanent secretariat, a Technical Review Panel (TRP), and 
the World Bank as its trustee.

* The board is the governing body of the Fund, consisting of 18 voting 
members and 5 nonvoting members. The voting members consist of seven 
government representatives from developing countries, seven government 
representatives from donor countries, and one representative each from 
a developing country nongovernmental organization (NGO), a developed 
country NGO, the private sector, and private foundations. The five 
nonvoting members consist of a representative from WHO, the World Bank 
(as trustee, see below), UNAIDS, a person representing communities 
living with HIV/AIDS, TB, or malaria, and one Swiss citizen appointed 
by the board.[Footnote 4] The board makes all funding decisions; sets 
Fund policies, strategies, and operational guidelines; and selects the 
executive director of the secretariat. The board chair and vice chair 
rotate between beneficiary and donor country representatives. In 
January 2003, the U.S. Secretary of Health and Human Services was 
elected to serve as chairman, replacing the outgoing chairman from 
Uganda. Figure 4 illustrates the current structure of the Fund's board.

Figure 4: The Structure of the Fund's Board as of April 1, 2003:

[See PDF for image]

Note: Board members from beneficiary countries represent a region, 
which is identified after each country listed. Membership on the board 
as a donor is based on contributions, and members can represent an 
individual country or a group of countries. (Countries may be grouped 
on the basis of common interests or geographic proximity.):

[End of figure]

The board plans to meet three times per year and strives to make 
decisions by consensus. When consensus cannot be reached, any voting 
member can call for a vote. Successful motions require approval from a 
two-thirds majority of those present, representing both donor and 
recipient voting groups, which means that the current voting structure 
may make it difficult to reach a decision. For example, the only time 
the board brought an issue to a vote a decision was not reached because 
the members could not get a sufficient number of affirmative votes.

The board has established four committees: (1) Governance and 
Partnership, (2) Resource Mobilization and Communications, (3) 
Portfolio Management and Procurement, and (4) Monitoring and 
Evaluation, Finance, and Audit. The committees respond to issues raised 
by the board and identify options for addressing them. For example, the 
Portfolio Management and Procurement Committee has developed a proposal 
appeals process. The United States has representatives on three of the 
four committees (Governance and Partnership; Portfolio Management and 
Procurement; and Monitoring and Evaluation, Finance, and Audit).

The secretariat has hired 63 staff as of April 1, 2003, to run the day-
to-day operations of the Fund.[Footnote 5] As the Fund's only full-time 
body, the secretariat receives and screens grant applications, studies 
and recommends strategies to the board, communicates board decisions to 
stakeholders, manages and oversees regional grant portfolios, receives 
and reviews program and financial reports submitted by grant recipients 
through the LFA, and performs all administrative functions for the 
Fund. The board reviews and approves the secretariat's business plan 
and budget. In January 2003, the board approved a $38.7 million budget 
for 2003 for the secretariat (see table 1).

Table 1: The Secretariat's Budget for 2003:

Dollars in millons.

Local Fund Agent fees; Description: Based on 
estimates for the assessment of principal recipients and annual 
oversight work per grant; Cost: $16.4; Percentage of budget: 42%.

Staff; Description: Includes salaries and benefits; 
Cost: 11.0; Percentage of budget: 28.

Professional; services; Description: Includes $2 
million in fees to the World Bank as trustee and $725,000 to WHO for 
administrative services; Cost: 5.0; Percentage of budget: 13.

Travel; Description: Includes secretariat and board 
travel; Cost: 2.1; Percentage 
of budget: 5.

Other; Description: Includes facilities, 
communication materials, information technology infrastructure, 
meetings, fixed assets, and other items; Cost: 4.3; 
Percentage of budget: 11.

Total; Description: [Empty]; 
Cost: $38.7[A]; Percentage of budget: 100%[A].

Source: GAO analysis of Fund documents.

[A] Figures may not add up due to rounding:

[End of table]

* The Technical Review Panel (TRP) reviews and evaluates eligible 
proposals submitted to the Fund. It currently consists of 22 
independent experts: 7 members with cross-cutting expertise in 
development, including health systems development, economics, public 
policy, and finance; 7 members with expertise in HIV/AIDS; 4 members 
with expertise in malaria; and 4 members with expertise in TB.[Footnote 
6] There are two U.S. members on the TRP, an expert on TB and an expert 
with cross-cutting expertise in health and development issues. The TRP 
is supported by a WHO/UNAIDS[Footnote 7] working group that reviews the 
accuracy of baseline data on disease prevalence, poverty, and other 
indicators provided in the proposals. The working group also reviews 
the accuracy and relevance of the information provided by applicants on 
their ability to effectively use additional funds. The TRP makes 
recommendations to the board for final decisions on proposal selection. 
According to officials at the Department of Health and Human Services, 
health and development experts at the Centers for Disease Control and 
Prevention and USAID conducted an informal review of approved proposals 
and largely concurred with the TRP's recommendations.

* As the Fund's trustee, the World Bank receives money from donors, 
holds the money in an interest-bearing account, and disburses it 
according to the Fund's written instructions.

At the country level, governance and oversight structures include a 
Country Coordinating Mechanism, a principal recipient, subrecipients, 
and a Local Fund Agent.[Footnote 8]

* The country coordinating mechanism (CCM) is meant to provide a forum 
for stakeholders to work together to identify needs and develop and 
submit proposals to the Fund and follow the progress of grant projects 
during implementation. According to the Fund, CCM membership should 
include high-level government representatives as well as 
representatives of NGOs, civil society, multilateral and bilateral 
agencies, and the private sector. Further, all eligible partners in the 
CCM should be entitled to receive Fund money based on their stated role 
in implementing the proposal.

* The principal recipient, which is a member of the CCM, is responsible 
for receiving and implementing the grant. A principal recipient can be 
a government agency, an NGO, a private organization, or, if 
alternatives are not available, a multilateral development 
organization. Of the 69 grant agreements resulting from the first round 
of proposals approved by the Fund, 41 (59 percent) are with principal 
recipients that are government agencies, 17 (25 percent) are with NGOs, 
and 9 (13 percent) are with the U.N. Development Program.[Footnote 9] 
(See app. II for more detailed information.) The principal recipient is 
responsible for making sure that funds are properly accounted for as 
well as for monitoring and evaluating the grant's effectiveness in 
accordance with indicators mutually agreed to by the Fund and the 
grantee. In some cases, there may be multiple principal recipients for 
a single grant. The principal recipient typically works with other 
entities, or subrecipients, to carry out grant activities.

* Subrecipients are entities, such as NGOs, with the expertise 
necessary to perform the work and can be other CCM members. The 
principal recipient is responsible for supervising any subrecipients 
and distributing Fund money to them.

* The local fund agent (LFA) is the Fund's representative in each 
recipient country and is responsible for financial and program 
oversight of grant recipients. This oversight role includes an 
assessment of recipients prior to their receiving money from the Fund. 
The assessment covers recipients' ability to maintain adequate 
financial controls, procure goods and services, and carry out program 
activities. The Fund selects one LFA in each country. As of April 1, 
2003, the Fund has contracted with four organizations to fill this 
role: two private sector firms, KPMG and PricewaterhouseCoopers; one 
private foundation that was formerly a public corporation, Crown 
Agents; and one multilateral entity, the U.N. Office for Project 
Services (UNOPS).[Footnote 10] The Fund may contract with additional 
organizations as the need arises and expects to receive bids from 
potential LFAs by August 2003.

Challenges at Country Level Slow Disbursement of Grants; Fund Taking 
Steps to Respond:

Limited Communication, Lack of Clarity over Roles and Responsibilities 
at Country Level:

As of late 2002, in three of the four countries we visited, country 
coordinating mechanisms were not operating at levels envisioned by the 
Fund, owing in part to insufficient communication between the Fund and 
the CCM as well as between the CCM's chair and members. This has 
resulted in confusion over the intended structure and purpose of the 
CCM. While our sample of only four countries is not necessarily 
representative of all grant recipients, several NGOs reported similar 
observations to the board. The Fund has posted general guidelines for 
CCMs on its Web site as well as in its calls for proposals. These 
guidelines encourage CCMs to hold regular meetings; engage all relevant 
participants, including representatives of civil society, in 
substantive discussions; ensure that information is disseminated to all 
interested parties; and be involved in the implementation of projects 
after proposals are developed and submitted to the Fund. However, many 
CCMs had difficulties following these guidelines. 

The role of the CCM in developing proposals and participating in their 
implementation after approval is not clear, according to a report by an 
international HIV/AIDS organization that assessed the participation of 
NGOs in the CCM process[Footnote 11] and according to CCM members in 
several countries. For example, many NGOs are not aware that they can 
participate in both the development and implementation of proposals. 
Furthermore, they are demanding clearer information on the selection of 
CCM members and the entities to which CCMs are accountable. An NGO 
participant told us that after a meeting in March 2002, the CCM did not 
convene again for about 6 months because it had received no guidance 
from the Fund on how to proceed. A number of members of another CCM 
said that they did not get a chance to vet or, in some cases, read 
proposals before endorsing them. In addition, after the proposals were 
submitted, members of this CCM were not informed of important events in 
a timely manner. A donor participating in this CCM stated that, with 
regard to a grant proposal for more than $200 million that was 
submitted in the second round and has since been approved, no one knows 
who will be responsible for implementing it when the money arrives.

A number of the CCM members with whom we met were concerned over the 
level of involvement of all relevant parties. According to information 
compiled by the Fund's Governance and Partnership Committee for the 
board's January 2003 meeting, all CCMs that submitted second-round 
proposals[Footnote 12] are chaired by a government official (79 percent 
from the health ministry). In addition, at least a quarter of the CCMs 
lack representation from one or more of the following groups: people 
living with one of the three diseases, the private sector, academic 
institutions, or religious organizations. In one country, for example, 
donors said that NGOs need to develop a stronger and more active voice 
on the CCM. An update on the Fund for nongovernmental organizations and 
civil society, prepared by the International Council of AIDS Service 
Organizations,[Footnote 13] expressed similar views regarding CCMs in 
countries that we did not visit. However, the update also included 
evidence that CCMs are enhancing the involvement of NGOs in national 
health policies in some countries. In addition to members of civil 
society, key government ministries and donors are often not included as 
members in current CCMs. The Governance and Partnership Committee 
recognized this point in the document prepared for the January 2003 
board meeting, stating, "Of concern is the relatively low participation 
from Ministries of Finance (37 percent), given the need to ensure 
consistency with Global Fund grant processes and overall fiscal and 
monetary policies of recipient countries." The committee also noted 
that although the World Bank is a significant source of resources for 
many recipients, it is a member of only 14 percent of CCMs. In one 
country we visited, for example, where neither the Ministry of Finance 
nor the World Bank were members of the CCM, a dispute over where the 
Fund money should be deposited delayed the signing of the country's 
first grant agreement.

:

Dissemination of information is also a problem, according to the 
international HIV/AIDS organization report and CCM members with whom we 
met. The report stated that many NGOs are not receiving essential 
information from the Fund because the CCM chairs receiving this 
information are not passing it on to all stakeholders. In one country, 
several CCM members told us that the CCM is not functioning well 
because the flow of information is tightly controlled by the chair. 
Many members of this CCM, for example, were unaware that a 
nongovernmental organization had also submitted a proposal to the 
Fund.[Footnote 14] As of April 1, 2003, more than 1 year after the 
proposal was submitted, the CCM had yet to review and endorse or reject 
it, as required by the Fund. As a result, the Fund has dropped this 
proposal from its list of those approved in the first round.

Of the four countries we visited, even the country with the most 
functional CCM experienced some difficulties. This country had received 
substantial support from a Fund staff member, who spent 6 weeks in the 
country helping the CCM clarify the Fund's principles regarding CCMs 
and how its proposal will be implemented. This support, together with 
the active leadership of the CCM chair, was widely credited with the 
relative success of the CCM. Members of this CCM said it had become a 
transparent, multisectoral, participatory, and consensus-driven forum 
that has held frequent meetings. However, CCM members were still 
unclear as to their role after the grant is disbursed.

The Fund Is Taking Steps to Address Problems Associated with CCMs:

According to the Fund, it does not have sufficient resources to provide 
the same level of support for every country as it did in the country 
cited above. Nevertheless, it is currently attempting to enhance 
communication with and within country coordinating mechanisms in order 
to improve their functioning. While trying to remain flexible and 
attentive to differing situations in each country and avoid an overly 
prescriptive, "cookie-cutter" approach, the Fund's Governance and 
Partnership Committee proposed to the board in January 2003 specific 
guidelines for CCMs that address many
of the issues raised above.[Footnote 15] The committee also proposed 
that the secretariat work with it to develop a handbook for CCMs that 
contains these principles. Although the board did not reach a decision 
on this proposal in January 2003, as of April 1, 2003, the agreements 
between the Fund and grant recipients contained language describing the 
nature and duties of CCMs. This language states that CCMs are to have a 
role in monitoring the implementation of Fund grants; that they should 
promote "participation of multiple constituencies, including Host 
Country governmental entities, donors, nongovernmental organizations, 
faith-based organizations and the private sector"; and that they should 
meet regularly to develop plans and share information. According to 
U.S. government officials who were involved in setting up the Fund and 
who attended the January 2003 board meeting, the Fund may also consider 
other options to enhance the functioning of CCMs, such as having those 
CCMs that have been working relatively well share best practices with 
others or having a member of the secretariat hold regional workshops 
for CCMs from several countries. Starting in December 2002 through the 
spring of 2003, the Fund held a series of regional workshops for CCM 
members and other stakeholders in the Philippines, Myanmar, Senegal, 
and Cuba.[Footnote 16] Additional workshops are scheduled to take place 
in South Africa, Ukraine, and Latin America. According to the Fund, 
these workshops are providing a forum for "open dialogue," whereby the 
Fund can disseminate and clarify information and receive feedback. In 
addition, the Fund is considering expanding the secretariat to allow 
its staff to devote more time to advising individual CCMs and to 
working with local partners, such as bilateral and multilateral donors, 
that are assisting with grant implementation.

Administrative Arrangement with WHO Causing Delays; Fund Considering 
Alternate Arrangements:

The Fund established an administrative services agreement with the WHO, 
an agency of the United Nations, to benefit from some of the tax and 
employment advantages of an international organization,[Footnote 17] 
but this relationship is causing delays and other problems, and the 
Fund is considering alternate arrangements.[Footnote 18] The agreement 
with WHO requires that the Fund apply certain WHO regulations and 
systems governing personnel and contractual issues. According to WHO 
and Fund staff, while this agreement gives the staff of the secretariat 
important privileges in Switzerland and allowed the Fund to begin 
operating quickly, it has contributed to administrative delays, 
frustration, and uncertainties concerning responsibility and 
accountability.

Regarding delays, once the Fund makes certain administrative decisions, 
it must wait until it obtains clearance from officials at WHO before it 
can act. According to secretariat officials and one of the local fund 
agents we met with, this dual approval process has delayed the approval 
of LFA contracts by up to 8 weeks. The officials stated that this is 
significant because it has lengthened the time required to get grant 
agreements completed and signed by recipient countries. The WHO 
official responsible for approving the Fund's administrative decisions 
said that it takes several weeks to vet key actions, such as the LFA 
contracts, when they are added to his unit's existing workload.

In addition to creating delays, the relationship between the Fund and 
WHO has led to frustration and uncertainties for Fund staff concerning 
the scope of their responsibility and the authorities to whom they are 
accountable. For example, although the board granted the executive 
director of the Fund the authority to sign contracts with vendors and 
grantees, WHO must be a party to all contracts since the executive 
director is technically a WHO employee. According to officials from 
both the Fund and WHO, removing the dual approval process would lessen 
delays and uncertainties over roles and responsibilities.

:

The board asked the secretariat to look into pursuing enhanced legal 
benefits for the Fund from Swiss authorities.[Footnote 19] An important 
objective for this change is to allow the Fund to withdraw from the 
administrative services agreement with the WHO while retaining tax and 
other advantages. However, according to the Fund, there are important 
considerations to be resolved before the board would approve and the 
Swiss government would authorize a change in recognition. The board 
expects to address this issue at its next meeting in June 2003.

The Fund Developed Comprehensive Oversight Systems and Issued 
Procurement Guidance, but Systems Face Challenges, and Guidance Is 
Still Evolving:

The Fund has developed systems for financial accountability and for 
monitoring and evaluating grant activities and has issued guidance on 
procurement. However, in the Fund's first year of operation, these 
systems faced challenges at the country level that the Fund is working 
to address, and procurement guidance is still evolving.

Oversight Systems Established but Face Challenges:

The Fund, through the local fund agent, has established a comprehensive 
system for overseeing grant recipients, but the introduction of the LFA 
has been marked by controversy and misconceptions regarding its role. 
These problems may impede the implementation of grants. The Fund 
recognizes these issues and is developing additional guidance for LFAs 
and principal recipients.

:

The Fund Has Established a Comprehensive System for Ensuring 
Recipients' Financial Accountability:

The Fund has established a system for ensuring that principal 
recipients rigorously account for the money they spend. This system 
requires them to demonstrate adequate finance and management systems 
for disbursing money, maintaining internal controls, recording 
information, managing and organizing personnel, and undergoing periodic 
audits. The secretariat, the LFA, and the principal recipient each has 
a role in this system. The secretariat selects the LFAs, exercises 
quality control over their work, and draws up grant agreements. Prior 
to selecting LFAs, the secretariat considers their independence from 
principal recipients and other CCM members in an effort to avoid 
potential conflicts of interest. It also considers their expertise in 
overseeing financial management, disease mitigation programs, and 
procurement, as well as their experience with similar assignments. The 
LFAs, in turn, assess principal recipients for the same capabilities. 
To ensure that the disbursement of funds will be carefully controlled, 
the secretariat provides principal recipients with limited amounts of 
money at a time, based on their documentation of project results. In an 
effort to ensure clear definition of roles, responsibilities and 
accountability, it developed guidelines for LFAs that define their 
duties to assess and oversee principal recipients. For example, the 
LFA's financial assessment of the principal recipient is to be 
completed before the grant agreement is signed, and the secretariat is 
to receive and validate a preliminary assessment before the LFA 
proceeds with the full assessment. To minimize inefficiency, the 
preliminary assessment is to draw on existing records of the principal 
recipient's performance with other donors.

The Fund has established requirements for principal recipients in the 
grant agreement. Specifically, the agreement requires principal 
recipients to maintain records of all costs they incur, and these 
records must be in accordance with generally accepted accounting 
standards in their country or as agreed to by the Fund. Principal 
recipients are to have an independent auditor separate from the LFA and 
acceptable to the Fund that conducts annual financial audits of project 
expenditures. The principal recipient is also to ensure that the 
expenditures of subrecipients are audited. The LFA or another entity 
approved by the Fund is authorized to make site visits "at all 
reasonable times" to inspect the principal recipient's records, grant 
activities, and utilization of goods and services financed by the 
grant. The principal recipient is required to submit quarterly and 
annual reports to the Fund through the LFA on its financial activity 
and progress in achieving project results. For example, the annual 
financial reports are to include the cost per unit of public health 
products procured and the portion of funds supporting various 
activities such as prevention, treatment, care, administering the 
project, and enhancing local skills and infrastructure through training 
and other activities. The reports are also to specify the portion of 
funds used by local NGOs, international NGOs, government agencies and 
other public sector organizations (e.g., U.N. agencies), the private 
sector, and educational institutions. Failure to abide by these and 
other requirements in the grant agreement can result in the Fund 
terminating the grant or requiring the principal recipient to refund 
selected disbursements.

The Fund Has Established a Detailed System for Monitoring and 
Evaluating Grant Performance:

The Fund has established a detailed system for monitoring, evaluating, 
and reporting at regular intervals on the performance of grants that 
identifies specific roles for the LFA, principal recipient, 
subrecipients, and CCM. Prior to the signing of each grant agreement 
between the Fund and the principal recipient, the LFA conducts an 
assessment of the principal recipient that includes an evaluation of 
its capacity to monitor and evaluate grant projects. Within 90 days 
after the agreement enters into force, the principal recipient is 
required to submit a detailed plan for monitoring and evaluation. The 
principal recipient and the subrecipients are responsible for selecting 
the appropriate indicators, establishing baselines, gathering data, 
measuring progress, and preparing quarterly and annual reports. The LFA 
is charged with making sure that the principal recipient monitors and 
evaluates its projects and with reviewing the reports. If the LFA 
identifies concerns, it is to discuss them with the principal recipient 
and the CCM and may forward information to the Secretariat in Geneva. 
According to the Fund, the CCM should work closely with the principal 
recipient in establishing the monitoring and evaluation processes and 
should review the reports along with the LFA.

Building on the existing body of knowledge and contributions of 
evaluation specialists from organizations such as the U.S. Agency for 
International Development (USAID), UNAIDS, WHO, and the Centers for 
Disease Control and Prevention, the Fund has identified indicators for 
recipients to use in tracking the progress of grant-supported projects. 
The indicators that the principal recipient will use to track the 
progress of individual grants are expected to measure processes, 
outcomes, and impact. During the first 2 years of 5-year projects, the 
quarterly and annual reports submitted by the principal recipient to 
the LFA track steps taken in the project implementation process. For 
example, a process indicator for HIV/AIDS prevention activities could 
measure the dissemination of information, such as the number of 
prevention brochures developed and distributed to teenagers or other 
at-risk groups. Starting in the third year, the principal recipient is 
expected to report on program outcomes. Following the HIV/AIDS 
prevention example, this would entail measuring whether the information 
had any effect on the behavior of the targeted population. In this 
example, the principal recipient would report on the percentage of the 
young people or others receiving the brochures who correctly identified 
ways of preventing HIV transmission and stated that they had changed 
their behavior accordingly. Near the end of the project, the principal 
recipient would report on its epidemiological impact by measuring 
whether there has been a reduction in the incidence of disease in the 
target group.

Funds will be released to the principal recipient at intervals based on 
its performance according to these indicators. The exact amounts to be 
released will be calculated using its anticipated expenditures. In 
cases where repeated reports demonstrate that progress is not being 
made, the Fund, after consultation with the LFA and CCM, may choose to 
make adjustments, including replacing the principal recipient or 
nonperforming subrecipients. The key evaluation for the majority of the 
grants[Footnote 20] comes after 2 years, when the Fund expects to begin 
seeing evidence that grant-supported activities are leading to desired 
outcomes. At that point, the Fund will decide whether to continue to 
disburse money to grant recipients.

The board has agreed in principle that there should also be an 
independent evaluation of the Fund's overall progress in meeting its 
key objective of reducing the impact of HIV/AIDS, TB, and malaria by 
mobilizing and leveraging additional resources. According to the Fund, 
this evaluation will include an assessment of the performance of the 
board and the secretariat. The focus of the evaluation will be on the 
board's and secretariat's performance in governing and implementing 
processes that enable Fund grants to relieve the burden of disease, 
improve public heath, and contribute to the achievement of the U.N.'s 
millennium goals.[Footnote 21] As of April 1, 2003, the board had not 
made a final decision on what entity will conduct the independent 
evaluation or how or when the evaluation will be conducted. In 
addition, the board had not yet determined what portion of its 
resources should be budgeted for this evaluation.

LFAs Face Several Challenges:

In certain countries, the introduction of the local fund agent has been 
marked by controversy and misconceptions, partly due to its newness, 
that may delay the designation of LFAs and make it difficult for them 
to oversee the implementation of grants. For example, the chair of the 
CCM in one of the countries we visited, where the principal recipient 
is the Ministry of Health, believed that another government ministry 
could serve as the LFA, despite the Fund's explicit instructions that 
the LFA must be independent from the grant recipient. In another 
country, key government and some donor officials were upset over the 
Fund's decision to bypass existing systems for handling donor funds. 
This situation contributed to resentment of the LFA as the Fund's local 
representative and oversight mechanism.[Footnote 22] A number of 
stakeholders with whom we met assumed incorrectly that the LFA was 
charging an exorbitant fee and deducting it from the grant. In fact, 
LFA fees are funded through the secretariat, not deducted from each 
grant. Payment for LFA services constitutes the single largest item in 
the secretariat's budget, accounting for $16.4 million, or 42 percent 
of its proposed 2003 budget. Overall, however, these fees represent 
only about 2 percent of estimated grant disbursements for the year, 
according to secretariat officials.[Footnote 23] Moreover, 
representatives from KPMG, one of the entities designated by the Fund 
as an LFA, told us that they are charging the Fund 50 percent less than 
they are charging other clients for similar services.

The Fund is aware of these problems and is attempting to address them. 
According to a January 2003 report of the board's Monitoring, 
Evaluation, Finance and Audit Committee, the oversight role of the LFA 
can create resentment in a country if it is carried out without local 
participation in problem analysis and resolution. The report cites the 
same example we observed, stating that recent experience in that 
country showed that existing local systems should be used as much as 
possible to avoid new and unnecessary requirements that distract from, 
rather than support, the Fund's goal of helping countries improve their 
capacity to fight disease. On January 12, 2003, the Fund drew up 
guidelines on financial management arrangements for principal 
recipients that offer several options, including the use of credible, 
existing local systems.

Finally, despite the Fund's having designated independence as a key 
factor in the selection of LFAs, the limited number of trained 
personnel and organizations in many recipient countries may impair 
independence, resulting in potential conflicts of interest. Given the 
small pool of qualified disease experts available for hire in some poor 
countries, subrecipients recruited to implement grant activities will 
be competing with subcontractors to the LFA for monitoring these 
disease-mitigation projects. It is unclear whether there is sufficient 
expertise available to provide staff for both of these functions. For 
example, in one of the countries we visited, the NGO the LFA had hired 
to assess the the principal recipient's capacity to carry out its grant 
activities will also be implementing a Fund project for this principal 
recipient. Since effective evaluation assumes that the monitor is 
independent of the implementer, achieving such independence may be a 
challenge in such circumstances. Conceivably, there also may be 
situations in which one U.N. organization, the U.N. Office for Project 
Services--one of the entities contracted by the Fund to serve as an 
LFA--may be overseeing another, the U.N. Development Program, serving 
as the principal recipient. Fund officials have stated that they would 
try to avoid this situation. The board's Monitoring, Evaluation, 
Finance and Audit Committee is developing a conflict of interest policy 
for LFAs. In the meantime, the Fund has required one LFA with a 
potential conflict of interest to include in its contract conflict of 
interest mitigation policies and procedures to minimize this 
possibility. The Fund has included conflict-of-interest and 
anticorruption provisions for principal recipients in the grant 
agreement document.

Board Developed Procurement Requirements, but Certain Issues Have Not 
Been Finalized:

The Fund, through the grant agreements, has developed detailed 
procurement requirements for medical supplies and a brief list of 
requirements for procuring nonmedical items, but certain issues have 
not been finalized. Establishing procurement requirements is important 
to ensure that grant recipients use Fund money efficiently as they 
purchase medicines, vehicles, office equipment, and other items; 
contract services; and hire personnel.

Board Analyzed Issues and Developed Options for Procuring Drugs and 
Health-Related Items:

The Fund's procurement provisions have focused primarily on drugs and 
health products[Footnote 24] because a significant amount of Fund money 
will be spent on these items and because drug procurement is complex. 
For example, the Fund anticipates that $194 million of grant money will 
be spent on drugs in the first 2 years of second-round grants, based on 
the proposals approved in that round.[Footnote 25] When other health 
products are included, the total comes to $267 million, or almost half 
of anticipated expenditures, for the first 2 years of round-1 grants, 
and $415 million, representing a similar percentage of anticipated 
expenditures, for the first 2 years of round-2 grants (see fig. 5). 
Drugs and health products for round-2 grants are expected to grow to 
$1.17 billion over the full life of these grants.[Footnote 26]

Figure 5: [Empty]Anticipated Grant Expenditures for Drugs and Health 
Products:

[See PDF for image]

[A] The totals for each round are board-approved ceilings for approved 
proposals; actual grant totals may be less.

[B] Drugs and health products include educational materials and possibly 
other items, based on information provided in the proposals for this 
category.

[C] Other includes expenses associated with infrastructure and equipment 
(e.g., vehicles), training, human resources, information systems, 
administrative costs, and monitoring and evaluation.

[End of figure]

Drug procurement is complex, as it requires strict standards for 
ensuring and monitoring quality, controlling transport and storage, and 
tracking how the products are used. For example, many grant recipients 
have plans to purchase antiretrovirals, which block the replication of 
HIV and are indispensable for treating patients living with the 
disease. These drugs have strict dosing regimens, and patients must be 
closely monitored to ensure that they are adhering to these regimens 
and do not develop adverse reactions or resistant strains of the virus. 
The Fund estimates that close to 200,000 people will be treated with 
antiretrovirals during the first 2 years of grants resulting from the 
first 2 proposal rounds and that close to 500,000
will be treated over the life of these grants.[Footnote 27] (See app. 
III for more detailed information.):

In April 2002, the board established a procurement and supply 
management task force, made up of technical experts from U.N. agencies, 
the private sector, and civil society, to analyze issues related to 
procuring drugs and health products and develop options and 
recommendations for grant recipients on how to procure them. In October 
2002, the task force provided a list of issues to the board that 
included:

* drug selection and the use of preventive, diagnostic, and related 
health products;

* monitoring drug quality and compliance with country drug registration 
processes for marketing and distribution;

* procurement principles and responsibilities, including supplier 
performance, obtaining the lowest price for quality goods, compliance 
with national laws and international obligations, and domestic 
production;

* managing and assessing the chain of supply, including forecasting 
demand, ensuring proper shipping and storage, and preventing drug 
diversion;

* payment issues, including direct payment and exemption from duties, 
tariffs and taxes; and:

* ensuring that patients adhere to treatment while monitoring drug 
resistance and adverse drug reactions.

In the grant agreements, the Fund provides specific requirements for 
principal recipients regarding many of these issues. The requirements 
are meant to ensure the continuous availability of safe and effective 
drugs and other health products at the lowest possible prices and to 
provide a standard for the LFA to use in evaluating the procurement 
activities of the principal recipient. For example, the requirements 
state that recipients must comply with established quality standards 
when purchasing medicines. The requirements also stipulate that no Fund 
money may be used for procuring drugs or other health products until 
the Fund, through the LFA, has verified that the principal recipient 
has the capacity to manage (or oversee subrecipients' management of) 
procurement tasks, such as purchasing, storing, and distributing these 
products in accordance with Fund guidance, unless the Fund agrees 
otherwise. In one country, the Fund issued additional procurement 
requirements to complement the grant agreement, based on an assessment 
of the principal recipient's ability to procure drugs and other goods. 
The Fund anticipates that all grant recipients that have plans to 
purchase medicines with Fund money will be assessed within 6 months 
after signing the grant agreement.

The Fund Provided General Requirements for Procuring Goods and 
Services:

In addition to providing specific requirements for procuring drugs and 
other health-related products, the grant agreement includes a brief 
list of general requirements that also apply to services and nonmedical 
items such as vehicles or office equipment. These requirements 
establish a series of minimum standards that recipients must observe 
when purchasing goods or executing contracts. For example, recipients 
are to award contracts on a competitive basis to the extent possible 
and must clearly describe the goods they are requesting when they ask 
for bids. They must pay no more than a reasonable price for goods and 
services, keep records of all transactions, and contract only with 
responsible suppliers who can successfully deliver the goods and 
services and otherwise fulfill the contract.

The Fund encourages recipients to use international and regional 
procurement mechanisms if doing so results in lower prices for quality 
products. For example, in one country, the U.N. Development Program 
will purchase vehicles for subrecipients because it has extensive 
experience with the import process. Similarly, the health ministry of 
another country--the entity that will implement the grant--may purchase 
antiretrovirals through the Pan American Health Organization. The Fund 
also encourages recipients with procurement experience to use their 
existing procedures, provided these procedures meet the requirements 
set forth in the grant agreement. For example, a principal recipient in 
one country will use its own procedures to purchase nonmedical items 
because these procedures are familiar and are based on generally 
accepted management practices.

:

The Fund Has Not Finalized Some Procurement Issues:

The Fund has not finalized certain procurement issues, including (1) 
the consequences of noncompliance with national laws regarding patent 
rights and other intellectual property obligations, (2) the acceptance 
of waivers that would permit recipients to pay higher prices for 
domestically produced goods, and (3) solicitation and acceptance of in-
kind donations. The board amended its policy on a fourth issue, payment 
of taxes and duties on products purchased with Fund money, and has 
asked the secretariat to monitor the impact of this change.

Board documents and the Fund's guidelines for submitting proposals 
encourage grant recipients to comply with national laws and applicable 
international obligations, including those pertaining to patents and 
other intellectual property rights. This issue is significant because 
these laws and obligations have rules and procedures that affect the 
procurement of drugs.[Footnote 28] The board has yet to reach a 
decision regarding the consequences of noncompliance, that is, whether 
failure to comply would automatically be considered a breach of the 
grant agreement and cause for termination of the grant. As of April 1, 
2003, the Fund has not included any language concerning compliance with 
national laws and international obligations in the grant agreement. In 
the interim, however, Fund officials stated that the Fund retains the 
option of using the more general termination clause in the grant 
agreement in the event that a recipient is found by the appropriate 
authorities to be in violation of national law or international 
obligations.

Another issue on which no formal decision has been made is whether the 
Fund, like the World Bank, should allow aid recipients to pay higher 
prices for domestically produced medicines and other goods to develop 
local manufacturing capacity. Documents prepared for the fourth board 
meeting note that the benefits of paying higher prices for domestically 
produced items are not clear and that it could be difficult for 
recipients to administer such a pricing scheme. The documents also note 
that it may be beyond the mandate of the Fund to support domestic 
efforts by approving higher prices for them. This was the only issue 
that board members brought to a vote, at the January 2003 meeting, and 
were unable to obtain the votes necessary to reach a decision. 
According to the Fund, the fact that no decision was reached means that 
the status quo--that recipients are encouraged to pay the lowest 
possible price for products of assured quality--remains. This policy is 
also likely to remain for the foreseeable future, since, according to 
Fund officials, it is no longer on the agenda of the Portfolio 
Management and Procurement Committee or the Procurement and Supply 
Management Advisory Panel, the two bodies that report to the board on 
issues pertaining to procurement.

The board deferred to its June 2003 meeting the question of whether the 
Fund should solicit or accept in-kind donations such as drugs on behalf 
of grant recipients. The Portfolio Management and Procurement Committee 
cautioned that the Fund needs to consider methods for ensuring the 
quality of these products.

While the Fund states in the grant agreements that Fund resources shall 
not be used to pay taxes and duties on products purchased in the 
recipient country, the Portfolio Management and Procurement Committee 
revisited this issue in its report to the January 2003 board 
meeting.[Footnote 29] Specifically, the committee noted that this 
policy may be difficult for NGO recipients to follow, as they have 
neither the authority to guarantee exemption nor the cash reserves to 
cover costs when exemptions are not possible. The committee implied 
that given these weaknesses, NGOs may be reluctant to serve as 
principal recipients and indicated in its report that making sure NGOs 
are included as principal recipients is more important than trying to 
ensure that grant recipients don't pay taxes and duties. The committee 
also raised a practical issue, noting that the Fund's current reporting 
requirements do not provide it with the information necessary to 
determine whether grantees are in fact using Fund money to pay these 
levies. At the January 2003 board meeting, the Fund amended its policy 
on exempting grant recipients from duties, tariffs, and taxes. The 
amended policy allows, but does not encourage, Fund resources to be 
used to pay these costs. The board asked the secretariat to monitor the 
impact of this revision and report back when sufficient information is 
available.

Lack of Resources Threatens Fund's Ability to Continue to Approve and 
Finance Grants:

The Fund's ability to approve and finance additional grants is 
threatened by a lack of sufficient resources. The Fund does not 
currently have enough pledges to allow it to approve more than a small 
number of additional proposals in 2003. In addition, without 
significant new pledges, the Fund will be unable to support all of the 
already approved grants beyond their initial 2-year agreements.

The Fund Requires Additional Pledges to Continue Approving Grants:

Because the Fund approves grant proposals on the basis of amounts that 
have been pledged, it will require additional pledges if it is to 
continue approving grants. According to the Fund, it will approve 
proposals on the basis of actual contributions to the trustee or 
pledges that will be converted to contributions soon after approval, so 
that proposals can be financed in a timely manner.[Footnote 30] As a 
result, the Fund has only a limited amount of money available for its 
third proposal round, currently planned for late 2003. In addition, the 
Fund will require significant additional pledges in order to continue 
holding proposal rounds beyond the planned third round. The Fund has 
less than $300 million available to support commitments in round 3, 
which would be significantly less than the $608 million in 2-year 
grants approved in the first round[Footnote 31] and the $884 million 
approved in the second round. These available resources are 
substantially less than the $1.6 billion in eligible proposals that the 
Fund expects to be able to approve in round 3. The Fund's resource 
needs are based on expected increases in eligible proposals over the 
next two rounds (rounds 3 and 4) due to a concerted effort on the part 
of local partners to prepare significantly expanded responses to AIDS, 
TB, and malaria (see fig. 6). Based on the number of technically sound 
proposals it expects to receive and approve in future rounds, and the 
amount pledged as of April 1, 2003, the Fund projects that it will 
require $1.6 billion in new pledges in 2003 and $3.3 billion in 2004.

:

Figure 6: Anticipated Expansion in Approved Proposal Dollars through 
2004 (actual and estimated 2-year commitments):

[See PDF for image]

Note: Round 3 has been announced and decisions will be made in October 
2003. Dates for rounds 4 and 5 are tentative.

[A] Actual data from receipt and approval of proposals (2-year grant 
commitments).

[B] Global Fund estimate of expected 2-year grant commitments.

[End of figure]

The Fund Requires Significantly Greater Contributions to Finance 
Approved Grants for Duration of Programs:

The Fund will require significantly greater contributions to finance 
approved grants beyond initial 2-year commitments of money. By January 
2003, the Fund had made 2-year grant commitments equaling nearly $1.5 
billion in the first two proposal rounds.[Footnote 32] Among other 
things, these grants seek to provide 500,000 people with AIDS 
medications and 500,000 AIDS orphans and other vulnerable children with 
care and support. Although the Fund approves grants that can be covered 
by pledges received, these pledges need only be sufficient to finance 
the initial 2-year period of the grant. Since the typical Fund-
supported project lasts five years, this could result in the Fund's 
inability to fulfill its longer-term obligation to programs that are 
deemed successful at the 2-year evaluation. If all currently approved 
proposals demonstrate acceptable performance after 2 years, the Fund 
will require $2.2 billion more to assist these programs for an 
additional 1 to 3 years. Currently, the Fund has $3.4 billion in total 
pledges and nearly $3.7 billion in potential obligations from the first 
two proposal rounds (see fig. 7). The Fund will only sign grant 
agreements based on money received by the trustee, as opposed to 
pledges received. Thus, continued support beyond the 2-year point 
requires that a significant amount of pledges be turned into actual 
contributions. However, not all pledges are contributed in a timely 
manner. For example, as of January 15, 2003, more than $90 million 
pledged through 2002 had still not been contributed, including $25 
million pledged by the United States. The Fund is providing numerous 
grants that will be used to procure antiretroviral drugs for people 
living with HIV/AIDS. Interruption or early termination of funding for 
such projects due to insufficient resources could have serious health 
implications, although Board documents suggest that special 
consideration for people undergoing treatment may be given during the 
evaluation process. The Fund currently has potential obligations 
lasting at least until 2007, and each additional proposal round will 
incur further long-term obligations for the Fund.

Figure 7: Pledges Made, Amount Received, and Grant Proposals Approved:

[See PDF for image]

Note: A shortfall in the funding of already approved grants is evident 
when one compares 5-year commitments with total pledges over this time 
frame. The small amount of resources available for funding new grants 
is evident when comparing 2-year commitments with pledges through 2003.

[A] The pledges expected through 2008 include $173 million that has no 
specified arrival date.

[B] These numbers represent the maximum amount approved by the board. 
Final budgets may be reduced during grant agreement negotiations. Five-
year figures are potential, rather than guaranteed, commitments.

[End of figure]:

:

The Fund has estimated that it will need at least $6.3 billion in 
pledges for 2003-2004 to continue approving new proposals and finance 
the grants already approved in rounds 1 and 2.[Footnote 33] The Fund is 
looking to raise these resources from both public and private sources, 
with $2.5 billion needed in 2003 alone. As of April 1, 2003, only $834 
million had been pledged for 2003, 6 percent of which came from the 
private sector.[Footnote 34]

Improvements in Grant-Making Processes Enhance Fund's Ability to 
Achieve Key Objectives, but Challenges Remain:

The Fund has established detailed objectives, criteria and procedures 
for its grant decision process and is making enhancements to the 
process in response to concerns raised by participants and 
stakeholders. Several improvements were made to the proposal review 
process between the first and second proposal rounds, and the Fund has 
committed to further improvement. These efforts will seek to address 
ongoing challenges, including ensuring that the money from the Fund 
supplements existing spending for HIV/AIDS, TB, and malaria and that 
recipients are able to use the new aid effectively. The Fund has 
recognized these challenges, but its efforts to address them are still 
evolving.

Improvements in Proposal Review and Grant-Making Process Support Key 
Objectives:

The Fund has made improvements in its proposal review and grant-making 
process to support key objectives, but assessment criteria and 
procedures are still evolving. According to the Fund, criteria for 
successful proposals include (1) technical soundness of approach, (2) 
functioning relationships with local stakeholders, (3) feasible plans 
for implementation and management, (4) potential for sustainability, 
and (5) appropriate plans for monitoring and evaluation. In addition, 
the Fund states that successful proposals will address the abilities of 
recipients to absorb the grant money. Using these criteria, the Fund 
established a grant approval process, based primarily on an independent 
evaluation of proposals by the TRP (see fig. 8).

:

Figure 8: Global Fund Proposal Review Process:

[See PDF for image]

[End of figure]

Between the first and second proposal rounds, the Fund made several 
improvements to the process, based on feedback from participants and 
the work of one of the Board's committees. These improvements included 
revising the proposal forms and instructions to make them more 
comprehensive and better support the criteria for successful proposals 
as determined by the Fund. The Fund also added additional members with 
cross-cutting expertise to the Technical Review Panel to allow it to 
better evaluate nonmedical development-related aspects of the proposal, 
and lengthened the proposal application period from 1 month in round 1 
to 3 months in round 2 to give applicants more time to develop their 
proposals. According to Fund and other officials, these improvements 
helped increase the overall quality of grant proposals submitted in the 
second proposal round. The Fund also made all successful proposals from 
the second round publicly available on its Web site, increasing the 
amount of information available to all interested parties regarding 
Fund-supported programs.

Some board members expressed concerns between the first and second 
proposal rounds regarding the way the Fund was addressing its objective 
of giving due priority to the countries with the greatest need. In 
particular, the board members were concerned that countries with the 
greatest need, as determined by poverty and disease burden, might be 
least able to submit high-quality proposals, resulting in their 
systematic exclusion. In the first two proposal rounds, the Fund 
excluded only the highest income countries
from grant eligibility.[Footnote 35] However, the Fund stated that 
priority would be given to proposals from the neediest countries. Most 
of the grants approved in rounds 1 and 2 did in fact go to recipients 
in countries defined by the World Bank as low income, demonstrating 
that the poorest countries were not being excluded. No money was 
awarded in countries defined as high income, and only 3 percent of the 
money was awarded in countries defined as upper-middle income (see fig. 
9). Similarly, sub-Saharan Africa, the region that suffers from the 
highest burden of disease for HIV/AIDS, received 61 percent of the 
money for HIV/AIDS programs. (See app. IV for more detailed 
information.):

Figure 9: Grant Money by Country Income LevelA:

[See PDF for image]

[A] Based on maximum allowable grant money for full length of Board 
approved programs.

[End of figure]

However, to further ensure that this key objective is supported, 
particularly in the face of increasingly scarce resources, the Fund has 
altered its eligibility criteria for round 3 to focus more clearly on 
need. All high-income countries are now excluded from eligibility for 
Fund money,[Footnote 36] and upper-middle and lower-middle income 
countries must meet additional criteria such as having cofinancing 
arrangements and a focus on poor or vulnerable populations. Low-income 
countries remain fully eligible to request support from the Fund. 
Beginning in the fourth round, WHO and UNAIDS will be asked to provide 
matrices categorizing countries by disease-related need[Footnote 37] 
and poverty.

Challenges to Grant-Making Process Remain:

The Fund and other stakeholders note that meeting key grant-making 
criteria will be a challenge, and the Fund's efforts to address these 
criteria are still evolving. According to Fund guidelines, proposals 
should demonstrate how grants complement and augment existing programs 
and how these additional resources can be effectively absorbed and 
used.[Footnote 38]

Ensuring that Grants Complement and Add to Existing Spending:

The Fund's policy is that both the pledges the Fund receives and the 
grants it awards must complement and add to existing spending on the 
three diseases. However, ensuring adherence to this policy is 
difficult. According to the secretariat, it monitors the sources of new 
pledges to assess whether the pledges represent additional spending. 
Monitoring pledges is problematic, however, because it can be difficult 
to determine how much money was spent by a donor or multilateral 
institution specifically on AIDS, TB, or malaria-related programs. 
According to a UNAIDS report, pledges to the Fund from most of the G-7 
countries,[Footnote 39] as well as from eight:

of the Development Assistance Committee[Footnote 40] governments, have 
thus far been determined to add to baseline HIV/AIDS funding. 
Nonetheless, despite its monitoring efforts, the Fund can only 
encourage, rather than require, donors to contribute new spending 
rather than simply transfer funds from related programs.

It is also difficult for the Fund to ensure that the grants it awards 
will augment existing spending at the country level. It has identified 
several situations to be avoided, including allowing grants to replace 
budgetary resources or other "official development assistance," and it 
has taken certain steps to ensure that the grants will in fact 
represent new and added spending in the country. For example, the Fund 
has required all applicants to include information in their proposals 
on how the funds requested would complement and supplement existing 
spending and programs. In addition, the Fund has reserved the right to 
terminate grants if it discovers that they are substituting for, rather 
than supplementing, other resources.[Footnote 41] However, the Fund 
does not have the ability to formally monitor whether grants constitute 
additional spending once disbursed, and we anticipate that doing so 
would be difficult. Even if the Fund succeeded in documenting that all 
grant money was spent appropriately on the approved project and that no 
previously allocated money for AIDS, TB, or malaria was supplanted in 
the process, it still could not document the level of spending on these 
diseases that would have occurred without the grant. Thus, it could not 
show whether the grant in fact substituted for money that would have 
been otherwise allocated. A report presented at the Fund's October 2002 
board meeting proposed the development of a policy for monitoring 
additionality.

At present, lacking any formal system, the Fund may be unaware of, or 
unprepared to address, situations in which its grants do not represent 
additional, complementary spending. For example, an official from a 
development agency that currently funds much of one country's TB 
program stated that he believes the country lacks the capacity to 
increase its program for TB, despite having received a TB grant in the 
first round. The development agency therefore planned to transfer its 
current TB funding to other health assistance projects in response to 
the Fund's TB grant, raising questions of whether the grant will 
fulfill its purpose of providing additional funding for TB. Similar 
concerns have been expressed by other officials representing both Fund 
recipients and donors.

Ensuring that Recipients Have the Capacity to Absorb New Funding:

Although the Fund has stated that proposals will be assessed based on 
whether they have demonstrated how grants could be effectively absorbed 
and used, Fund officials, donors, and others have raised concerns 
regarding the actual capacity of recipients to absorb new aid.[Footnote 
42] While some countries may have surplus labor and institutional 
capacity within their health sectors, other countries may have 
difficulty rapidly expanding their health sectors due to a shortage of 
skilled health workers or insufficient infrastructure to deliver health 
services. While such capacity constraints can be relieved over time 
with additional training and investment, in the short run they could 
limit the effectiveness of expanded health spending. For example, 
officials in one country told us that it has been slow in disbursing 
its World Bank HIV/AIDS money because of difficulties in establishing 
the necessary institutions to identify and distribute funds to 
effective projects. In another country, government and NGO officials 
cited a lack of administrative capacity in NGOs as a likely challenge 
to their ability to absorb the Fund grant. The Fund is aware of these 
concerns and is addressing them in a number of ways. Proposal 
applications must describe the current national capacity--the state of 
systems and services--available to respond to HIV/AIDS, TB, and 
malaria. After the first round, the Fund also added more members to the 
TRP to evaluate these issues in proposals. In addition, the Fund 
requires LFAs to preassess principal recipients to ensure that they are 
prepared to receive, disburse, and monitor the money. On at least one 
occasion, the Fund decided to reduce its initial grant disbursement to 
a recipient, based on concerns raised by the LFA in the preassessment.

:

The LFA preassessment does not address all potential constraints on a 
country's ability to absorb new funds, notably across sectors or at the 
macroeconomic level. While these capacity constraints could hinder the 
effectiveness of the grant, they could also generate unintended side 
effects beyond the scope of the funded project. Introducing more money 
into a sector with insufficient capacity to utilize it could draw 
scarce resources from other vital sectors, such as agriculture or 
education. For example, one way to reduce temporary shortages of 
skilled health workers would be to raise the salaries of those 
positions, relative to the rest of the economy. Over time, this wage 
disparity will provide an incentive to increase the number of graduates 
trained in the health field. However, in the short term, it may 
encourage already skilled workers in other sectors to pursue higher 
wages in the health sector, adversely affecting the sectors they leave. 
To the extent that these other sectors are also priorities in economic 
development, this could adversely affect a country's pursuit of poverty 
reduction. The country coordinating mechanism model of proposal 
development is intended to help avoid such problems by ensuring that 
those with the most knowledge of a country's needs and capacities are 
directly responsible for developing proposals. However, as discussed 
earlier, many CCMs are facing challenges in operating effectively.

The provision of large amounts of new foreign aid to countries from all 
sources, including the Global Fund and bilateral and multilateral 
initiatives, may also have unintended, detrimental macroeconomic 
implications. Large increases in development assistance are considered 
critical to the successful fight of the three diseases, as well as the 
achievement of long-term poverty reduction goals. Moreover, increasing 
the number of healthy people in a country, such as through successful 
treatment, may increase its productive capacity. However, increasing 
spending beyond a country's productive capacity could result in 
problems, such as increased domestic:

inflation, that are not conducive to growth or poverty 
reduction.[Footnote 43] While a substantial share of Global Fund grant 
money is expected to fund imports such as medicines--which likely have 
no adverse macroeconomic implications--a significant amount will also 
be spent domestically on nontraded items, such as salaries and 
construction expenses. Concerns over potential macroeconomic 
difficulties prompted one government to initially propose offsetting 
its Global Fund grant with reductions in other health spending; 
however, upon further assessment the government reconsidered and will 
not reduce other health spending. An International Monetary Fund 
official stated that he believed that the Global Fund grants are not 
generally large enough, as a share of a country's Gross Domestic 
Product, to cause significant macroeconomic effects. He added, however, 
that country authorities should nonetheless monitor these grants in 
case they do become significant and possibly destabilizing. The Global 
Fund expects that the amount of money that it disburses will rise 
substantially in the future, which--along with large increases in other 
proposed development assistance, such as through the U. S. Millennium 
Challenge Account[Footnote 44]---could substantially increase total 
aid flows to certain countries in a relatively short period of time. 
Available research on the macroeconomic effects of large increases in 
overall grant aid is thus far inconclusive, providing little guidance 
on the magnitude of assistance that may trigger these negative 
macroeconomic impacts.

Agency Comments and Our Evaluation:

We requested comments on a draft of this report from the Executive 
Director of the Fund, the Secretary of Health and Human Services, the 
Secretary of State, and the Administrator of USAID, or their designees. 
We received formal comments from the Fund as well as a combined formal 
response from the Department of Health and Human Services, the 
Department of State, and USAID (see apps. V and VI). Both the Fund and 
the U.S. agencies agreed with the information and analysis presented in 
this report. The Fund's Executive Director concluded that this report 
accurately describes the challenges faced by the Fund in responding to 
the three diseases. The Fund outlined measures it is taking to address 
these challenges and identified several additional challenges. The U.S. 
agencies stressed that they and other donor agencies should work with 
the Fund to address the challenges. Both the Fund and the U.S. agencies 
also submitted informal, technical comments, which we have incorporated 
into this report as appropriate.

We are sending copies of this report to the Executive Director of the 
Fund, the Secretary of Health and Human Services, the Secretary of 
State, the Administrator of USAID, and interested congressional 
committees. Copies of this report will also be made available to other 
interested parties on request. In addition, this report will be made 
available at no charge on the GAO Web site at http://www.gao.gov.

If you or your staff have any questions about this report, please 
contact me at (202) 512-3149. Other GAO contacts and staff 
acknowledgments are listed in appendix V.

Sincerely yours,

David Gootnick, Director
International Affairs and Trade:

Signed by David Gootnick:

[End of section]

Appendixes:

Appendix I: Objectives, Scope, and Methodology:

At the request of the Chairman of the House Committee on 
Appropriations, Subcommittee on Foreign Operations, Export Financing 
and Related Programs, we assessed (1) the Fund's progress in developing 
governance structures; (2) the systems that the Fund has developed for 
ensuring financial accountability, monitoring and evaluating grant 
projects, and procuring goods and services; (3) the Fund's efforts to 
mobilize resources; and (4) the Fund's grant decision-making process.

To assess how the Fund has progressed in establishing structures needed 
for governance, we reviewed Fund documents and reports from 
nongovernmental organizations involved in the country coordinating 
mechanism (CCM) process. We also interviewed Fund officials in Geneva 
and U.S. government officials from the Departments of State and Health 
and Human Services and the U.S. Agency for International Development. 
In addition, we traveled to Haiti and Tanzania, two "fast-track" 
countries where grant agreements were about to be signed, and two 
countries less far along in the process, Ethiopia and Honduras. In 
these four countries, we met with a wide variety of CCM members, 
including high-level and other government officials, multilateral and 
bilateral donors, faith-based and other nongovernmental organizations, 
professional associations, and private sector groups. In all four 
countries, we met with organizations designated as the principal 
recipient in grant proposals. We also met with a Fund official who was 
working with the CCM in Haiti. To understand the Fund's administrative 
services agreement with the World Health Organization (WHO) and its 
impact on the Fund's ability to quickly disburse grants, we reviewed 
Fund documents pertaining to the agreement, met with WHO and Fund 
officials in Geneva and spoke with a U.S. government legal expert in 
Washington, D.C. We also met with a WHO official while he was traveling 
in San Francisco.

To assess the Fund's development of oversight systems to ensure 
financial and program accountability, we reviewed Fund documents 
prepared for the second, third, and fourth board meetings; requirements 
contained in the grant agreements; and Fund working papers prepared 
after the fourth board meeting that propose further clarifications and 
guidelines for principal recipients and Local Fund Agents (LFAs). We 
also reviewed the U.S. Agency for International Development's (USAID) 
Handbook of indicators for programs on human immunodeficiency virus/
acquired immunodeficiency syndrome (HIV/AIDS) and sexually transmitted 
infections, Joint United Nations HIV/AIDS Program publications for 
monitoring and evaluating national AIDS programs, and WHO coordinates 
for charting progress against HIV/AIDS, tuberculosis and malaria. We 
held discussions with the secretariat in Geneva on fiduciary and 
financial accountability and monitoring and evaluation of grant 
programs and received presentations on these topics from the 
secretariat. In addition, we discussed these issues with U.S. 
government officials from the Departments of State and Health and Human 
Services and USAID, and with officials from the World Bank. During our 
fieldwork in Haiti and Tanzania, we met with representatives of the 
entities serving as local fund agents in those countries (KPMG in Haiti 
and PricewaterhouseCoopers in Tanzania); we also met with 
representatives from KPMG's Global Grants Program in San Francisco. To 
further our understanding of the Fund's oversight systems and the 
challenges to implementing them in recipient countries, we met with the 
following groups in all four of the countries we visited: government 
officials, multilateral and bilateral donors, nongovernmental 
organizations, and others who will be involved in implementing Fund 
grants or who had observations on the Fund's oversight systems.

To assess the Fund's procurement guidelines, we reviewed the grant 
agreements and data prepared by the Fund showing anticipated spending 
on drugs and other items and met with Fund officials in Geneva. We also 
interviewed a U.S. legal expert serving on the procurement and supply 
management task force and reviewed documents prepared by taskforce and 
the Portfolio Management and Procurement Committee at the request of 
the board. To learn about the ability of grant recipients to procure 
goods and services, we met with local fund agent representatives, a 
principal recipient, and subrecipients. We asked the principal 
recipient and subrecipient representatives about their procurement 
practices, their understanding of Fund guidance and their plans to 
procure medicines, goods and services. In Washington, D.C., we met with 
staff from a public health consulting firm who assessed one of the 
principal recipients. To further our understanding of the procurement 
process, we also interviewed representatives from several other 
consulting firms that assist developing country governments and 
nongovernmental organizations with procurement.

To assess Fund efforts to mobilize resources, we analyzed pledges made 
to the Fund from public and private sources as well as the Fund's 
commitments to grants. We reviewed their expected future financial 
needs to make new grants and finance already approved grants. In 
addition, we contacted officials from the Fund to discuss their 
resource mobilization efforts and strategies for dealing with a 
resource shortfall.

:

To assess the Fund's grant-making process, we reviewed the objectives 
and processes of their proposal review and approval processes. We 
reviewed Fund documents, including proposal applications and guidelines 
from the first and second proposal rounds. Additionally we tracked the 
Fund's efforts at improving the grant-making process by reviewing 
documents prepared for the Fund's first four board meetings. We also 
interviewed representatives from the Fund and the technical review 
panel in Geneva and Washington, D.C., and we asked government, donor, 
and nongovernmental organization officials in the four recipient 
countries we visited for their assessment of the proposal process and 
its challenges. To assess the nature of the challenges identified and 
any efforts made by the Fund to address them, we interviewed officials 
at the World Bank and International Monetary Fund, and we conducted a 
review of relevant economic literature. We also conducted research and 
reviewed data available on global spending on HIV/AIDS, TB, and 
malaria.

For general background and additional perspectives on the Fund, we 
spoke with representatives from the Gates Foundation, the Global AIDS 
Alliance, and the Earth Institute at Columbia University.

We conducted our work in Washington, D.C.; San Francisco; Geneva, 
Switzerland; Ethiopia; Haiti; Honduras; and Tanzania, from April 2002 
through April 2003, in accordance with generally accepted government 
auditing standards.

:

[End of section]

Appendix II: Status of Round 1 Grants:

Table 2: Signed Grant Agreements--Funds Committed and Disbursed:

No: 1; Country: Argentina; Program: HIV/AIDS; Principal recipient: U.N. 
Development Program (UNDP); Local Fund Agent: PricewaterhouseCoopers 
(PWC); Date of signed agreement: 29-Jan-03; Total funds committed
(in U.S. dollars)[A]: $12,177,200; Latest 
disbursement date[B]: 21-Mar-03; Total funds disbursed as of April 22, 
2003 (in U.S. dollars): $1,500,000.

No: 2; Country: Benin; Program: Malaria; Principal recipient: UNDP; 
Local Fund Agent: PWC; Date of signed agreement: 20-Mar-03; Total funds 
committed
(in U.S. dollars)[A]: 2,389,185; Latest 
disbursement date[B]: 14-Apr-03; Total funds disbursed as of April 22, 
2003 (in U.S. dollars): 341,021.

No: 3; Country: Burundi; Program: HIV/AIDS; Principal recipient: 
Minsitry of Health; Local Fund Agent: PWC; Date of signed agreement: 
04-Apr-03; Total funds committed
(in U.S. dollars)[A]: 4,877,000; Latest 
disbursement date[B]: 17-Apr-03; Total funds disbursed as of April 22, 
2003
(in U.S. dollars): 554,100.

No: 4; Country: Cambodia; Program: HIV/AIDS; Principal recipient: 
Ministry of Health, Kingdom of Cambodia; Local Fund Agent: KPMG; Date 
of signed agreement: 27-Jan-03; Total funds committed
(in U.S. dollars)[A]: 11,242,538; Latest 
disbursement date[B]: 17-Apr-03; Total funds disbursed as of April 22, 
2003
(in U.S. dollars): 95,919.

No: 5; Country: China; Program: TB; Principal recipient: Chinese Center 
for Disease Control and Prevention, Ministry of Health; Local Fund 
Agent: U.N. Office for Project Services (UNOPS); Date of signed 
agreement: 30-Jan-03; Total funds committed
(in U.S. dollars)[A]: 25,370,000; Latest 
disbursement date[B]: 10-Apr-03; Total funds disbursed as of April 22, 
2003
(in U.S. dollars): 1,200,000.

No: 6; Country: China; Program: Malaria; Principal recipient: Chinese 
Center for Disease Control and Prevention, Ministry of Health; Local 
Fund Agent: UNOPS; Date of signed agreement: 30-Jan-03; Total funds 
committed
(in U.S. dollars)[A]: 3,523,662; Latest 
disbursement date[B]: 10-Apr-03; Total funds disbursed as of April 22, 
2003
(in U.S. dollars): 542,800.

No: 7; Country: Ethiopia; Program: TB; Principal recipient: Ministry of 
Health; Local Fund Agent: KPMG; Date of signed agreement: 18-Mar-03; 
Total funds committed
(in U.S. dollars)[A]: 10,962,600; Latest 
disbursement date[B]: [Empty]; Total funds disbursed as of April 22, 2003
(in U.S. dollars): [Empty].

No: 8; Country: Ghana; Program: HIV/AIDS; Principal recipient: The 
Ministry of Health of the Republic of Ghana; Local Fund Agent: PWC; 
Date of signed agreement: 12-Dec-02; Total funds committed
(in U.S. dollars)[A]: 4,965,478; Latest 
disbursement date[B]: 18-Dec-02; Total funds disbursed as of April 22, 
2003
(in U.S. dollars): 429,599.

No: 9; Country: Ghana; Program: TB; Principal recipient: The Ministry 
of Health of the Republic of Ghana; Local Fund Agent: PWC; Date of 
signed agreement: 12-Dec-02; Total funds committed
(in U.S. dollars)[A]: 2,336,940; Latest 
disbursement date[B]: 18-Dec-02; Total funds disbursed as of April 22, 
2003
(in U.S. dollars): 468,270.

No: 10; Country: Haiti; Program: HIV/AIDS; Principal recipient: 
Fondation SOGEBANK; Local Fund Agent: Mrov-Pierre - Cabinet 
d'Experts-Comptables[C]; Date of signed agreement: 12-Dec-02; Total 
funds committed
(in U.S. dollars)[A]: 17,945,067; Latest 
disbursement date[B]: 10-Feb-03; Total funds disbursed as of April 22, 
2003
(in U.S. dollars): 2,690,782.

No: 11; Country: Haiti; Program: HIV/AIDS; Principal recipient: UNDP; 
Local Fund Agent: Mrov-Pierre - Cabinet d'Experts-Comptables[C]; Date 
of signed agreement: 12-Dec-02; Total funds committed
(in U.S. dollars)[A]: 6,754,697; Latest 
disbursement date[B]: 10-Feb-03; Total funds disbursed as of April 22, 
2003
(in U.S. dollars): 926,762.

No: 12; Country: Honduras; Program: HIV/AIDS; Principal recipient: 
UNDP; Local Fund Agent: PricewaterhouseCoopers Interamerica S. de R.L.; 
Date of signed agreement: 29-Jan-03; Total funds committed
(in U.S. dollars)[A]: 12,583,466; Latest 
disbursement date[B]: 2-Apr-03; Total funds disbursed as of April 22, 
2003
(in U.S. dollars): 685,735.

No: 13; Country: Honduras; Program: TB; Principal recipient: UNDP; 
Local Fund Agent: PricewaterhouseCoopers Interamerica S. de R.L.; Date 
of signed agreement: 29-Jan-03; Total funds committed
(in U.S. dollars)[A]: 3,790,500; Latest 
disbursement date[B]: 2-Apr-03; Total funds disbursed as of April 22, 
2003
(in U.S. dollars): 514,731.

No: 14; Country: Honduras; Program: Malaria; Principal recipient: UNDP; 
Local Fund Agent: PricewaterhouseCoopers Interamerica S. de R.L.; Date 
of signed agreement: 29-Jan-03; Total funds committed
(in U.S. dollars)[A]: 4,096,050; Latest 
disbursement date[B]: 2-Apr-03; Total funds disbursed as of April 22, 
2003
(in U.S. dollars): 379,889.

No: 15; Country: India; Program: TB; Principal recipient: Ministry of 
Health; Local Fund Agent: World Bank (in process of being finalized); 
Date of signed agreement: 30-Jan-03; Total funds committed
(in U.S. dollars)[A]: 5,650,999; Latest 
disbursement date[B]: [Empty]; Total funds disbursed as of April 22, 
2003 (in U.S. dollars): [Empty].

No: 16; Country: Indonesia; Program: TB; Principal recipient: Ministry 
of Health; Local Fund Agent: PWC; Date of signed agreement: 27-Jan-03; 
Total funds committed
(in U.S. dollars)[A]: 21,612,265; Latest 
disbursement date[B]: 13-Mar-03; Total funds disbursed as of April 22, 
2003
(in U.S. dollars): 750,000.

No: 17; Country: Kenya; Program: HIV/AIDS; Principal recipient: Sanaa 
Art Promotions; Local Fund Agent: PWC; Date of signed agreement: 30-
Mar-03; Total funds committed
(in U.S. dollars)[A]: 2,650,813; Latest 
disbursement date[B]: 15-Apr-03; Total funds disbursed as of April 22, 
2003
(in U.S. dollars): 137,270.

No: 18; Country: Kenya; Program: HIV/AIDS; Principal recipient: KENWA; 
Local Fund Agent: PWC; Date of signed agreement: 30-Mar-03; Total funds 
committed
(in U.S. dollars)[A]: 220,875; Latest 
disbursement date[B]: 15-Apr-03; Total funds disbursed as of April 22, 
2003
(in U.S. dollars): 8,500.

No: 19; Country: Lao People's Democratic Republic; Program: HIV/AIDS; 
Principal recipient: Ministry of Health, Department of Hygiene & 
Prevention; Local Fund Agent: KPMG; Date of signed agreement: 05-Feb-
03; Total funds committed
(in U.S. dollars)[A]: 1,307,664; Latest 
disbursement date[B]: [Empty]; Total funds disbursed as of April 22, 
2003
(in U.S. dollars): [Empty].

No: 20; Country: Lao People's Democratic Republic; Program: Malaria; 
Principal recipient: Ministry of Health, Department of Hygiene & 
Prevention; Local Fund Agent: KPMG; Date of signed agreement: 05-Feb-
03; Total funds committed
(in U.S. dollars)[A]: 3,155,152; Latest 
disbursement date[B]: [Empty]; Total funds disbursed as of April 22, 
2003
(in U.S. dollars): [Empty].

No: 21; Country: Madagascar; Program: Malaria; Principal recipient: 
Population Services International; Local Fund Agent: PWC; Date of 
signed agreement: 05-Feb-03; Total funds committed
(in U.S. dollars)[A]: 1,482,576; Latest 
disbursement date[B]: 12-Mar-03; Total funds disbursed as of April 22, 
2003
(in U.S. dollars): 591,931.

No: 22; Country: Malawi; Program: HIV/AIDS; Principal recipient: 
National Aids Committee; Local Fund Agent: PWC; Date of signed 
agreement: 10-Feb-03; Total funds committed
(in U.S. dollars)[A]: 41,751,500; Latest 
disbursement date[B]: [Empty]; Total funds disbursed as of April 22, 
2003
(in U.S. dollars): [Empty].

No: 23; Country: Moldova; Program: HIV/AIDS-TB; Principal recipient: 
Ministry of Health; Local Fund Agent: PWC; Date of signed agreement: 
20-Mar-03; Total funds committed
(in U.S. dollars)[A]: 5,257,941; Latest 
disbursement date[B]: 22-Apr-03; Total funds disbursed as of April 22, 
2003
(in U.S. dollars): 880,000.

No: 24; Country: Mongolia; Program: TB; Principal recipient: Ministry 
of Health; Local Fund Agent: UNOPS; Date of signed agreement: 05-Feb-
03; Total funds committed
(in U.S. dollars)[A]: 644,000; Latest 
disbursement date[B]: 9-Apr-03; Total funds disbursed as of April 22, 
2003
(in U.S. dollars): 42,960.

No: 25; Country: Morocco; Program: HIV/AIDS; Principal recipient: 
Ministry of Health; Local Fund Agent: PWC; Date of signed agreement: 
29-Jan-03; Total funds committed
(in U.S. dollars)[A]: 4,738,806; Latest 
disbursement date[B]: 21-Feb-03; Total funds disbursed as of April 22, 
2003
(in U.S. dollars): 420,000.

No: 26; Country: Panama; Program: TB; Principal recipient: UNDP; Local 
Fund Agent: PWC; Date of signed agreement: 10-Feb-03; Total funds 
committed
(in U.S. dollars)[A]: 440,000; Latest 
disbursement date[B]: 20-Mar-03; Total funds disbursed as of April 22, 
2003
(in U.S. dollars): 112,000.

No: 27; Country: Rwanda; Program: HIV/AIDS-TB; Principal recipient: 
Ministry of Health; Local Fund Agent: Crown Agents; Date of signed 
agreement: 10-Apr-03; Total funds committed
(in U.S. dollars)[A]: 8,409,268; Latest 
disbursement date[B]: 17-Apr-03; Total funds disbursed as of April 22, 
2003
(in U.S. dollars): 790,854.

No: 28; Country: Senegal; Program: HIV/AIDS; Principal recipient: 
National AIDS Council of Senegal; Local Fund Agent: KPMG; Date of 
signed agreement: 10-Feb-03; Total funds committed
(in U.S. dollars)[A]: 6,000,000; Latest 
disbursement date[B]: 28-Feb-03; Total funds disbursed as of April 22, 
2003
(in U.S. dollars): 600,000.

No: 29; Country: Senegal; Program: Malaria; Principal recipient: 
National Strategic Plan to Fight Malaria, Ministry of Health; Local 
Fund Agent: KPMG; Date of signed agreement: 10-Feb-03; Total funds 
committed
(in U.S. dollars)[A]: 4,285,714; Latest 
disbursement date[B]: 28-Feb-03; Total funds disbursed as of April 22, 
2003
(in U.S. dollars): 350,000.

No: 30; Country: Serbia; Program: HIV/AIDS; Principal recipient: 
Economics Institute; Local Fund Agent: UNOPS; Date of signed agreement: 
16-Apr-03; Total funds committed
(in U.S. dollars)[A]: 2,718,714; Latest 
disbursement date[B]: [Empty]; Total funds disbursed as of April 22, 
2003
(in U.S. dollars): [Empty].

No: 31; Country: Sri Lanka; Program: Malaria; Principal recipient: 
Ministry of Health of Sri Lanka; Local Fund Agent: PWC; Date of signed 
agreement: 19-Dec-02; Total funds committed
(in U.S. dollars)[A]: 730,140; Latest 
disbursement date[B]: 11-Feb-03; Total funds disbursed as of April 22, 
2003
(in U.S. dollars): 176,573.

No: 32; Country: Sri Lanka; Program: Malaria; Principal recipient: 
Lanka Jatika Sarvodaya Shramadana Sangamaya; Local Fund Agent: PWC; 
Date of signed agreement: 19-Dec-02; Total funds committed
(in U.S. dollars)[A]: 4,467,480; Latest 
disbursement date[B]: 11-Feb-03; Total funds disbursed as of April 22, 
2003
(in U.S. dollars): 752,893.

No: 33; Country: Sri Lanka; Program: TB; Principal recipient: Ministry 
of Health of Sri Lanka; Local Fund Agent: PWC; Date of signed 
agreement: 19-Dec-02; Total funds committed
(in U.S. dollars)[A]: 2,384,980; Latest 
disbursement date[B]: 11-Feb-03; Total funds disbursed as of April 22, 
2003
(in U.S. dollars): 478,073.

No: 34; Country: Sri Lanka; Program: TB; Principal recipient: Lanka 
Jatika Sarvodaya Shramadana Sangamaya; Local Fund Agent: PWC; Date of 
signed agreement: 19-Dec-02; Total funds committed
(in U.S. dollars)[A]: 475,020; Latest 
disbursement date[B]: 11-Feb-03; Total funds disbursed as of April 22, 
2003
(in U.S. dollars): 75,260.

No: 35; Country: Tajikistan; Program: HIV/AIDS; Principal recipient: 
UNDP; Local Fund Agent: PWC; Date of signed agreement: 31-Mar-03; Total 
funds committed
(in U.S. dollars)[A]: 1,474,520; Latest 
disbursement date[B]: 22-Apr-03; Total funds disbursed as of April 22, 
2003
(in U.S. dollars): 206,702.

No: 36; Country: Tanzania; Program: Malaria; Principal recipient: The 
Ministry of Health of the Government of the United Republic of 
Tanzania; Local Fund Agent: PricewaterhouseCoopers Limited; Date of 
signed agreement: 11-Dec-02; Total funds committed
(in U.S. dollars)[A]: 11,959,076; Latest 
disbursement date[B]: 4-Feb-03; Total funds disbursed as of April 22, 
2003
(in U.S. dollars): 489,478.

No: 37; Country: Uganda; Program: HIV/AIDS; Principal recipient: 
Ministry Of Finance, Planning And Economic Development Of The 
Government Of Uganda; Local Fund Agent: PWC; Date of signed agreement: 
06-Mar-03; Total funds committed
(in U.S. dollars)[A]: 36,314,892; Latest 
disbursement date[B]: [Empty]; Total funds disbursed as of April 22, 
2003
(in U.S. dollars): [Empty].

No: 38; Country: Ukraine; Program: HIV/AIDS; Principal recipient: 
National AIDS Foundation; Local Fund Agent: PWC; Date of signed 
agreement: 19-Mar-03; Total funds committed
(in U.S. dollars)[A]: 6,150,000; Latest 
disbursement date[B]: [Empty]; Total funds disbursed as of April 22, 
2003
(in U.S. dollars): [Empty].

No: 39; Country: Ukraine; Program: HIV/AIDS; Principal recipient: 
Ministry of Health; Local Fund Agent: PWC; Date of signed agreement: 
29-Jan-03; Total funds committed
(in U.S. dollars)[A]: 16,925,200; Latest 
disbursement date[B]: 17-Apr-03; Total funds disbursed as of April 22, 
2003
(in U.S. dollars): 481,926.

No: 40; Country: Ukraine; Program: HIV/AIDS; Principal recipient: UNDP; 
Local Fund Agent: PWC; Date of signed agreement: 17-Feb-03; Total funds 
committed
(in U.S. dollars)[A]: 1,895,011; Latest 
disbursement date[B]: [Empty]; Total funds disbursed as of April 22, 
2003
(in U.S. dollars): [Empty].

No: 41; Country: Worldwide regions; Program: HIV/AIDS; Principal 
recipient: World Lutheran Federation; Local Fund Agent: KPMG-Geneva; 
Date of signed agreement: 29-Jan-03; Total funds committed
(in U.S. dollars)[A]: 485,000; Latest 
disbursement date[B]: [Empty]; Total funds disbursed as of April 22, 
2003
(in U.S. dollars): [Empty].

No: 42; Country: Zambia; Program: HIV/AIDS; Principal recipient: 
Central Board of Health; Local Fund Agent: PWC; Date of signed 
agreement: 30-Mar-03; Total funds committed
(in U.S. dollars)[A]: 21,214,271; Latest 
disbursement date[B]: [Empty]; Total funds disbursed as of April 22, 
2003
(in U.S. dollars): [Empty].

No: 43; Country: Zambia; Program: TB; Principal recipient: Central 
Board of Health; Local Fund Agent: PWC; Date of signed agreement: 30-
Mar-03; Total funds committed
(in U.S. dollars)[A]: 12,447,294; Latest 
disbursement date[B]: [Empty]; Total funds disbursed as of April 22, 
2003
(in U.S. dollars): [Empty].

No: 44; Country: Zambia; Program: HIV/AIDS; Principal recipient: 
Churches Health Association; Local Fund Agent: PWC; Date of signed 
agreement: 30-Mar-03; Total funds committed
(in U.S. dollars)[A]: 6,614,958; Latest 
disbursement date[B]: [Empty]; Total funds disbursed as of April 22, 
2003
(in U.S. dollars): [Empty].

No: 45; Country: Zambia; Program: TB; Principal recipient: Churches 
Health Association; Local Fund Agent: PWC; Date of signed agreement: 
30-Mar-03; Total funds committed
(in U.S. dollars)[A]: 2,307,962; Latest 
disbursement date[B]: [Empty]; Total funds disbursed as of April 22, 
2003
(in U.S. dollars): [Empty].

No: 46; Country: Zanzibar; Program: Malaria; Principal recipient: 
Ministry of Health; Local Fund Agent: PWC; Date of signed agreement: 
06-Mar-03; Total funds committed
(in U.S. dollars)[A]: 781,220; Latest 
disbursement date[B]: [Empty]; Total funds disbursed as of April 22, 
2003
(in U.S. dollars): [Empty].

No: 47; Country: Zimbabwe; Program: Malaria; Principal recipient: 
Ministry of Health; Local Fund Agent: PWC; Date of signed agreement: 
05-Feb-03; Total funds committed
(in U.S. dollars)[A]: 6,716,250; Latest 
disbursement date[B]: [Empty]; Total funds disbursed as of April 22, 
2003
(in U.S. dollars): [Empty].

No: Total signed agreements as of April 22, 2003; Total funds committed
(in U.S. dollars)[A]: $366,683,944; Latest 
disbursement date[B]: [Empty]; Total funds disbursed as of April 22, 
2003
(in U.S. dollars): $17,674,028.

Source: The Fund.

Note: blank cells indicate that no disbursement had been made as of 
April 22, 2003.

[A] Amounts may differ from grant ceilings approved by the board 
because budgets may be reduced during grant agreement negotiations.

[B] Date disbursement request was sent from the Fund to the World Bank.

[C] Affiliated with KPMG.

[End of table]

Table 3: Grant Agreements in the Pipeline:

No: 48; Country: South Africa; Program: HIV/AIDS-TB; Principal 
recipient: National Treasury (Soul City); Local Fund Agent: PWC; Date 
of signed agreement: Not yet signed; [Empty]; Total funds committed
(in U.S. dollars)[A]: $2,354,000; Latest 
disbursement date[B]: [Empty]; Total funds disbursed as of April 22, 
2003
(in U.S. dollars): [Empty].

No: 49; Country: South Africa; Program: HIV/AIDS-TB; Principal 
recipient: National Treasury (Love Life); Local Fund Agent: PWC; Date 
of signed agreement: Not yet signed; [Empty]; Total funds committed
(in U.S. dollars)[A]: 12,000,000; [Empty]; Latest 
disbursement date[B]: [Empty]; Total funds disbursed as of April 22, 
2003
(in U.S. dollars): [Empty].

No: 50; Country: South Africa; Program: HIV/AIDS-TB; Principal 
recipient: National Treasury (Kwazulu Natal Sub-CCM); Local Fund Agent: 
PWC; Date of signed agreement: Not yet signed; [Empty]; Total funds 
committed
(in U.S. dollars)[A]: 26,741,529; [Empty]; Latest 
disbursement date[B]: [Empty]; Total funds disbursed as of April 22, 
2003
(in U.S. dollars): [Empty].

No: 51; Country: Tanzania; Program: HIV/AIDS; Principal recipient: 
President's Office of Regional Administration & Local Government 
(PORALG); Local Fund Agent: PWC; Date of signed agreement: Not yet 
signed; [Empty]; Total funds committed
(in U.S. dollars)[A]: 5,400,000; [Empty]; Latest 
disbursement date[B]: [Empty]; Total funds disbursed as of April 22, 
2003
(in U.S. dollars): [Empty].

No: 52; Country: Zambia; Program: Malaria; Principal recipient: Central 
Board of Health[C]; Local Fund Agent: PWC; Date of signed agreement: 
Not yet signed; [Empty]; Total funds committed
(in U.S. dollars)[A]: 17,892,000; [Empty]; Latest 
disbursement date[B]: [Empty]; Total funds disbursed as of April 22, 
2003
(in U.S. dollars): [Empty].

No: 53; Country: Zambia; Program: Malaria; Principal recipient: 
Churches Health Association[C]; Local Fund Agent: PWC; Date of signed 
agreement: Not yet signed; [Empty]; Total funds committed
(in U.S. dollars)[A]: [Empty]; [Empty]; Latest 
disbursement date[B]: [Empty]; Total funds disbursed as of April 22, 
2003
(in U.S. dollars): [Empty].

No: 54; Country: Zambia; Program: HIV/AIDS; Principal recipient: 
Minsitry of Finance & National Planning[C]; Local Fund Agent: PWC; Date 
of signed agreement: Not yet signed; [Empty]; Total funds committed
(in U.S. dollars)[A]: 14,468,771; [Empty]; Latest 
disbursement date[B]: [Empty]; Total funds disbursed as of April 22, 
2003
(in U.S. dollars): [Empty].

No: 55; Country: Zambia; Program: HIV/AIDS; Principal recipient: Zambia 
National AIDS Network[C]; Local Fund Agent: PWC; Date of signed 
agreement: Not yet signed; [Empty]; Total funds committed
(in U.S. dollars)[A]: [Empty]; [Empty]; Latest 
disbursement date[B]: [Empty]; Total funds disbursed as of April 22, 
2003
(in U.S. dollars): [Empty].

No: 56; Country: Zambia; Program: TB; Principal recipient: Zambia 
National AIDS Network; Local Fund Agent: PWC; Date of signed agreement: 
Not yet signed; [Empty]; Total funds committed
(in U.S. dollars)[A]: 1,644,744; [Empty]; Latest 
disbursement date[B]: [Empty]; Total funds disbursed as of April 22, 
2003
(in U.S. dollars): [Empty].

No: 57; Country: Zimbabwe; Program: HIV/AIDS; Principal recipient: 
National Aids Council; Local Fund Agent: PWC; Date of signed agreement: 
Not yet signed; [Empty]; Total funds committed
(in U.S. dollars)[A]: 10,300,000; [Empty]; Latest 
disbursement date[B]: [Empty]; Total funds disbursed as of April 22, 
2003
(in U.S. dollars): [Empty].

No: Total agreements in the pipeline as of April 22, 2003; Date of 
signed agreement: [Empty]; [Empty]; Total funds committed
(in U.S. dollars)[A]: $90,801,044; [Empty]; Latest 
disbursement date[B]: [Empty]; Total funds disbursed as of April 22, 
2003
(in U.S. dollars): [Empty].

Source: The Fund.

Note: blank cells indicate that no disbursement had been made as of 
April 22, 2003.

[A] Amounts may differ from grant ceilings approved by the board because 
budgets may be reduced during grant agreement negotiations.

[B] Date disbursement request was sent from the Fund to the World Bank.

[C] the exact amounts to be disbursed to principal recipients have not yet 
been decided.

[End of table]:

Table 4: Grant Agreements Pending, but Less Far Along in the Process:

No: 58; Country: Chile; Program: HIV/AIDS; Principal recipient: 
nongovernmental organization (specifics to be determined); Local Fund 
Agent: To be determined; Date agreement expected to be signed: [Empty]; 
Total funds committed
(in U.S. dollars)[A]: $13,574,098; Latest 
disbursement date[B]: [Empty]; Total funds disbursed as of April 22, 
2003 (in U.S. dollars): [Empty].

No: 59; Country: Democratic People's Republic of Korea; Program: TB; 
Principal recipient: To be determined; Local Fund Agent: Global Fund 
secretariat; Date agreement expected to be signed: [Empty]; Total funds 
committed
(in U.S. dollars)[A]: 2,294,000; Latest 
disbursement date[B]: [Empty]; Total funds disbursed as of April 22, 
2003 (in U.S. dollars): [Empty].

No: 60; Country: Indonesia; Program: HIV/AIDS; Principal recipient: 
Ministry of Health; Local Fund Agent: PWC; Date agreement expected to 
be signed: Being negotiated; Total funds committed
(in U.S. dollars)[A]: 6,924,971; Latest 
disbursement date[B]: [Empty]; Total funds disbursed as of April 22, 
2003
(in U.S. dollars): [Empty].

No: 61; Country: Indonesia; Program: Malaria; Principal recipient: 
Ministry of Health; Local Fund Agent: PWC; Date agreement expected to 
be signed: Being negotiated; Total funds committed
(in U.S. dollars)[A]: 16,018,800; Latest 
disbursement date[B]: [Empty]; Total funds disbursed as of April 22, 
2003
(in U.S. dollars): [Empty].

No: 62; Country: Mali; Program: Malaria; Principal recipient: Ministry 
of Health; Local Fund Agent: KPMG; Date agreement expected to be 
signed: [Empty]; Total funds committed
(in U.S. dollars)[A]: 2,023,424; Latest 
disbursement date[B]: [Empty]; Total funds disbursed as of April 22, 
2003
(in U.S. dollars): [Empty].

No: 63; Country: Nigeria; Program: HIV/AIDS; Principal recipient: 
Yakubu Gown Center; Local Fund Agent: KPMG; Date agreement expected to 
be signed: Being negotiated; Total funds committed
(in U.S. dollars)[A]: 17,722,103; Latest 
disbursement date[B]: [Empty]; Total funds disbursed as of April 22, 
2003
(in U.S. dollars): [Empty].

No: 64; Country: Nigeria; Program: HIV/AIDS; Principal recipient: 
Yakubu Gown Center; Local Fund Agent: KPMG; Date agreement expected to 
be signed: Being negotiated; Total funds committed
(in U.S. dollars)[A]: 8,708,684; Latest 
disbursement date[B]: [Empty]; Total funds disbursed as of April 22, 
2003
(in U.S. dollars): [Empty].

No: 65; Country: Nigeria; Program: HIV/AIDS; Principal recipient: 
Yakubu Gown Center; Local Fund Agent: KPMG; Date agreement expected to 
be signed: Being negotiated; Total funds committed
(in U.S. dollars)[A]: 1,687,599; Latest 
disbursement date[B]: [Empty]; Total funds disbursed as of April 22, 
2003
(in U.S. dollars): [Empty].

No: 66; Country: Thailand; Program: TB; Principal recipient: Ministry 
of Health; Local Fund Agent: PWC; Date agreement expected to be signed: 
Being negotiated; Total funds committed
(in U.S. dollars)[A]: 6,999,350; Latest 
disbursement date[B]: [Empty]; Total funds disbursed as of April 22, 
2003
(in U.S. dollars): [Empty].

No: 67; Country: Thailand; Program: HIV/AIDS; Principal recipient: 
Ministry of Health; Local Fund Agent: PWC; Date agreement expected to 
be signed: Being negotiated; Total funds committed
(in U.S. dollars)[A]: 30,933,204; Latest 
disbursement date[B]: [Empty]; Total funds disbursed as of April 22, 
2003
(in U.S. dollars): [Empty].

No: 68; Country: Vietnam; Program: HIV/AIDS; Principal recipient: 
Ministry of Health; Local Fund Agent: KPMG; Date agreement expected to 
be signed: [Empty]; Total funds committed
(in U.S. dollars)[A]: 7,500,00; Latest 
disbursement date[B]: [Empty]; Total funds disbursed as of April 22, 
2003
(in U.S. dollars): [Empty].

No: 69; Country: Vietnam; Program: TB; Principal recipient: Ministry of 
Health; Local Fund Agent: KPMG; Date agreement expected to be signed: 
 ; Total funds committed
(in U.S. dollars)[A]: 2,500,000; Latest 
disbursement date[B]: [Empty]; Total funds disbursed as of April 22, 
2003
(in U.S. dollars): [Empty].

No: Total pending agreements as of April 22, 2003; Total funds 
committed
(in U.S. dollars)[A]: $109,386,233; Latest 
disbursement date[B]: [Empty]; Total funds disbursed as of April 22, 
2003
(in U.S. dollars): [Empty].

No: Total agreements (signed, in pipeline, and pending) as of April 22, 
2003; Total funds committed
(in U.S. dollars)[A]: $566,871,221; Latest 
disbursement date[B]: [Empty]; Total funds disbursed as of April 22, 
2003
(in U.S. dollars): [Empty].

Source: The Fund.

Note: blank cells indicate that no disbursement had been made as of 
April 22, 2003, or that negotiations for signing the grant agreement 
had not yet begun as of that date.

[A] Amounts may differ from grant ceilings approved by the board because 
budgets may be reduced during grant agreement negotiations.

[B] Date disbursement request was sent from the Fund to the World Bank.

[End of table]:

[End of section]

Appendix III: Drug Procurement Cycle:

The drug procurement cycle includes most of the decisions and actions 
that health officials and caregivers must take to determine the 
specific drug quantities obtained, prices paid, and quality of drugs 
received. The process generally requires that those responsible for 
procurement (1) decide which drugs to procure; (2) determine what 
amount of each medicine can be procured, given the funds available; (3) 
select the method they will use for procuring, such as open or 
restricted tenders; (4) identify suppliers capable of delivering 
medicines; (5) specify the conditions to be included in the contract; 
(6) check the status of each order; (7) receive and inspect the 
medicine once it arrives; (8) pay the suppliers; (9) distribute the 
drugs, making sure they reach all patients; (10) collect information on 
how patients use the medicine; and (11) review drug selections. Because 
these steps are interrelated, those responsible for drug procurement 
need reliable information to make informed decisions.

[See PDF for image]

Note: the adaptation is from Managing Drug Supply, 2ND edition, revised 
and expanded, Hartford, CT, Kumarian Press, 1997.

[End of figure]

[End of section]

Appendix IV: Indicators of Need for Recipient Countries:

Country[A]: Low Income; Diseases being addressed by Fund grants: [Empty]; 
Amount requested by approved grants for full length of programs: [Empty]; 
HIV/AIDS rate (%), Adults (15-49): [Empty]; Malaria (Cases/
100,000): [Empty]; TB (Cases/
100,000): [Empty]; Human Development Index[B]: [Empty]; Gross National 
Income per capita: (in U.S. dollars)[C]: [Empty].

Country[A]: Afghanistan; Diseases being addressed by Fund grants: HIV/
AIDS, Malaria, TB; Amount requested by approved grants for full length 
of programs: $3,125,605; HIV/AIDS rate (%), Adults (15-49): NA; Malaria 
(Cases/
100,000): 1,825; TB (Cases/
100,000): 325; Human Development Index[B]: NA; Gross National Income 
per capita: (in U.S. dollars)[C]: NA.

Country[A]: Armenia; Diseases being addressed by Fund grants: HIV/AIDS; 
Amount requested by approved grants for full length of programs: 
7,249,981; HIV/AIDS rate (%), Adults (15-49): 0.2; Malaria (Cases/
100,000): NA; TB (Cases/
100,000): 58; Human Development Index[B]: 76; Gross National Income per 
capita: (in U.S. dollars)[C]: $2,580.

Country[A]: Bangladesh; Diseases being addressed by Fund grants: HIV/
AIDS; Amount requested by approved grants for full length of programs: 
19,961,030; HIV/AIDS rate (%), Adults (15-49): <.1; Malaria (Cases/
100,000): 47; TB (Cases/
100,000): 241; Human Development Index[B]: 145; Gross National Income 
per capita: (in U.S. dollars)[C]: 1,590.

Country[A]: Benin; Diseases being addressed by Fund grants: HIV/AIDS, 
TB, Malaria; Amount requested by approved grants for full length of 
programs: 23,803,254; HIV/AIDS rate (%), Adults (15-49): 3.6; Malaria 
(Cases/
100,000): 11,845; TB (Cases/
100,000): 266; Human Development Index[B]: 158; Gross National Income 
per capita: (in U.S. dollars)[C]: 980.

Country[A]: Burkina Faso; Diseases being addressed by Fund grants: HIV/
AIDS, Malaria; Amount requested by approved grants for full length of 
programs: 26,776,825; HIV/AIDS rate (%), Adults (15-49): 6.5; Malaria 
(Cases/
100,000): 5,852; TB (Cases/
100,000): 319; Human Development Index[B]: 169; Gross National Income 
per capita: (in U.S. dollars)[C]: 970.

Country[A]: Burundi; Diseases being addressed by Fund grants: HIV/AIDS, 
Malaria; Amount requested by approved grants for full length of 
programs: 26,423,125; HIV/AIDS rate (%), Adults (15-49): 8.3; Malaria 
(Cases/
100,000): 28,031; TB (Cases/
100,000): 382; Human Development Index[B]: 171; Gross National Income 
per capita: (in U.S. dollars)[C]: 580.

Country[A]: Cambodia; Diseases being addressed by Fund grants: HIV/
AIDS, TB, Malaria; Amount requested by approved grants for full length 
of programs: 47,460,470; HIV/AIDS rate (%), Adults (15-49): 2.7; 
Malaria (Cases/
100,000): 473; TB (Cases/
100,000): 560; Human Development Index[B]: 130; Gross National Income 
per capita: (in U.S. dollars)[C]: 1,440.

Country[A]: Central African Republic; Diseases being addressed by Fund 
grants: HIV/AIDS; Amount requested by approved grants for full length 
of programs: 25,090,588; HIV/AIDS rate (%), Adults (15-49): 12.9; 
Malaria (Cases/
100,000): 2,485; TB (Cases/
100,000): 415; Human Development Index[B]: 165; Gross National Income 
per capita: (in U.S. dollars)[C]: 1,160.

Country[A]: Chad; Diseases being addressed by Fund grants: TB; Amount 
requested by approved grants for full length of programs: 3,039,327; 
HIV/AIDS rate (%), Adults (15-49): 3.6; Malaria (Cases/
100,000): 190; TB (Cases/
100,000): 270; Human Development Index[B]: 166; Gross National Income 
per capita: (in U.S. dollars)[C]: 870.

Country[A]: Comores; Diseases being addressed by Fund grants: Malaria; 
Amount requested by approved grants for full length of programs: 
2,485,878; HIV/AIDS rate (%), Adults (15-49): NA; Malaria (Cases/
100,000): 2,286; TB (Cases/
100,000): NA; Human Development Index[B]: 137; Gross National Income 
per capita: (in U.S. dollars)[C]: 1,590.

Country[A]: Congo, (Democratic Republic of); Diseases being addressed 
by Fund grants: TB; Amount requested by approved grants for full length 
of programs: 7,973,002; HIV/AIDS rate (%), Adults (15-49): 4.9; Malaria 
(Cases/
100,000): 2,963; TB (Cases/
100,000): 301; Human Development Index[B]: 155; Gross National Income 
per capita: (in U.S. dollars)[C]: 680.

Country[A]: Cote d'Ivoire; Diseases being addressed by Fund grants: 
HIV/AIDS; Amount requested by approved grants for full length of 
programs: 91,203,150; HIV/AIDS rate (%), Adults (15-49): 9.7; Malaria 
(Cases/
100,000): 6,874; TB (Cases/
100,000): 375; Human Development Index[B]: 156; Gross National Income 
per capita: (in U.S. dollars)[C]: 1,500.

Country[A]: East Timor; Diseases being addressed by Fund grants: 
Malaria; Amount requested by approved grants for full length of 
programs: 2,963,723; HIV/AIDS rate (%), Adults (15-49): NA; Malaria 
(Cases/
100,000): NA; TB (Cases/
100,000): NA; Human Development Index[B]: NA; Gross National Income per 
capita: (in U.S. dollars)[C]: NA.

Country[A]: Eritrea; Diseases being addressed by Fund grants: Malaria; 
Amount requested by approved grants for full length of programs: 
7,911,425; HIV/AIDS rate (%), Adults (15-49): 2.8; Malaria (Cases/
100,000): 7,405; TB (Cases/
100,000): 272; Human Development Index[B]: 157; Gross National Income 
per capita: (in U.S. dollars)[C]: 960.

Country[A]: Ethiopia; Diseases being addressed by Fund grants: HIV/
AIDS, TB, Malaria; Amount requested by approved grants for full length 
of programs: 237,568,925; HIV/AIDS rate (%), Adults (15-49): 6.4; 
Malaria (Cases/
100,000): 618; TB (Cases/
100,000): 373; Human Development Index[B]: 168; Gross National Income 
per capita: (in U.S. dollars)[C]: 660.

Country[A]: Georgia; Diseases being addressed by Fund grants: HIV/AIDS; 
Amount requested by approved grants for full length of programs: 
12,125,644; HIV/AIDS rate (%), Adults (15-49): <.1; Malaria (Cases/
100,000): NA; TB (Cases/
100,000): 72; Human Development Index[B]: 81; Gross National Income per 
capita: (in U.S. dollars)[C]: 2,680.

Country[A]: Ghana; Diseases being addressed by Fund grants: HIV/AIDS, 
TB, Malaria; Amount requested by approved grants for full length of 
programs: 29,214,210; HIV/AIDS rate (%), Adults (15-49): 3; Malaria 
(Cases/
100,000): 8,874; TB (Cases/
100,000): 281; Human Development Index[B]: 129; Gross National Income 
per capita: (in U.S. dollars)[C]: 1,910.

Country[A]: Guinea; Diseases being addressed by Fund grants: HIV/AIDS, 
Malaria; Amount requested by approved grants for full length of 
programs: 22,029,110; HIV/AIDS rate (%), Adults (15-49): NA; Malaria 
(Cases/
100,000): 6,469; TB (Cases/
100,000): 255; Human Development Index[B]: 159; Gross National Income 
per capita: (in U.S. dollars)[C]: 1,930.

Country[A]: Haiti; Diseases being addressed by Fund grants: HIV/AIDS; 
Amount requested by approved grants for full length of programs: 
66,905,477; HIV/AIDS rate (%), Adults (15-49): 6.1; Malaria (Cases/
100,000): 12; TB (Cases/
100,000): 361; Human Development Index[B]: 146; Gross National Income 
per capita: (in U.S. dollars)[C]: 1,470.

Country[A]: India; Diseases being addressed by Fund grants: HIV/
AIDS,TB; Amount requested by approved grants for full length of 
programs: 137,975,999; HIV/AIDS rate (%), Adults (15-49): 0.8; Malaria 
(Cases/
100,000): 226; TB (Cases/
100,000): 185; Human Development Index[B]: 124; Gross National Income 
per capita: (in U.S. dollars)[C]: 2,340.

Country[A]: Indonesia; Diseases being addressed by Fund grants: HIV/
AIDS, TB, Malaria; Amount requested by approved grants for full length 
of programs: 130,574,740; HIV/AIDS rate (%), Adults (15-49): 0.1; 
Malaria (Cases/
100,000): 82; TB (Cases/
100,000): 282; Human Development Index[B]: 110; Gross National Income 
per capita: (in U.S. dollars)[C]: 2,830.

Country[A]: Kenya; Diseases being addressed by Fund grants: HIV/AIDS, 
TB, Malaria; Amount requested by approved grants for full length of 
programs: 176,745,326; HIV/AIDS rate (%), Adults (15-49): 15; Malaria 
(Cases/
100,000): 1,000; TB (Cases/
100,000): 417; Human Development Index[B]: 134; Gross National Income 
per capita: (in U.S. dollars)[C]: 1,010.

Country[A]: Korea, (Democratic Republic of); Diseases being addressed 
by Fund grants: TB; Amount requested by approved grants for full length 
of programs: 4,891,000; HIV/AIDS rate (%), Adults (15-49): NA; Malaria 
(Cases/
100,000): 448; TB (Cases/
100,000): 176; Human Development Index[B]: NA; Gross National Income 
per capita: (in U.S. dollars)[C]: NA.

Country[A]: Kyrgyz Republic; Diseases being addressed by Fund grants: 
HIV/AIDS, TB; Amount requested by approved grants for full length of 
programs: 19,844,373; HIV/AIDS rate (%), Adults (15-49): <.1; Malaria 
(Cases/
100,000): NA; TB (Cases/
100,000): 130; Human Development Index[B]: 102; Gross National Income 
per capita: (in U.S. dollars)[C]: 2,540.

Country[A]: Lao People's Democratic Republic; Diseases being addressed 
by Fund grants: HIV/AIDS, TB, Malaria; Amount requested by approved 
grants for full length of programs: 19,507,845; HIV/AIDS rate (%), 
Adults (15-49): <.1; Malaria (Cases/
100,000): 755; TB (Cases/
100,000): 171; Human Development Index[B]: 143; Gross National Income 
per capita: (in U.S. dollars)[C]: 1,540.

Country[A]: Lesotho; Diseases being addressed by Fund grants: HIV/AIDS, 
TB; Amount requested by approved grants for full length of programs: 
34,312,000; HIV/AIDS rate (%), Adults (15-49): 31; Malaria (Cases/
100,000): NA; TB (Cases/
100,000): 542; Human Development Index[B]: 132; Gross National Income 
per capita: (in U.S. dollars)[C]: 2,590.

Country[A]: Liberia; Diseases being addressed by Fund grants: HIV/AIDS, 
TB; Amount requested by approved grants for full length of programs: 
12,192,274; HIV/AIDS rate (%), Adults (15-49): NA; Malaria (Cases/
100,000): 26,828; TB (Cases/
100,000): 271; Human Development Index[B]: NA; Gross National Income 
per capita: (in U.S. dollars)[C]: NA.

Country[A]: Madagascar; Diseases being addressed by Fund grants: HIV/
AIDS, Malaria; Amount requested by approved grants for full length of 
programs: 8,335,149; HIV/AIDS rate (%), Adults (15-49): 0.3; Malaria 
(Cases/
100,000): 2,360; TB (Cases/
100,000): 236; Human Development Index[B]: 147; Gross National Income 
per capita: (in U.S. dollars)[C]: 820.

Country[A]: Malawi; Diseases being addressed by Fund grants: HIV/AIDS, 
Malaria; Amount requested by approved grants for full length of 
programs: 323,798,722; HIV/AIDS rate (%), Adults (15-49): 15; Malaria 
(Cases/
100,000): 58,139; TB (Cases/
100,000): 443; Human Development Index[B]: 163; Gross National Income 
per capita: (in U.S. dollars)[C]: 600.

Country[A]: Mali; Diseases being addressed by Fund grants: Malaria; 
Amount requested by approved grants for full length of programs: 
2,592,991; HIV/AIDS rate (%), Adults (15-49): 1.7; Malaria (Cases/
100,000): 4,213; TB (Cases/
100,000): 261; Human Development Index[B]: 164; Gross National Income 
per capita: (in U.S. dollars)[C]: 780.

Country[A]: Mauritania; Diseases being addressed by Fund grants: TB, 
Malaria; Amount requested by approved grants for full length of 
programs: 5,627,299; HIV/AIDS rate (%), Adults (15-49): NA; Malaria 
(Cases/
100,000): 11,000; TB (Cases/
100,000): 241; Human Development Index[B]: 152; Gross National Income 
per capita: (in U.S. dollars)[C]: 1,630.

Country[A]: Moldova; Diseases being addressed by Fund grants: HIV/AIDS, 
TB; Amount requested by approved grants for full length of programs: 
11,719,047; HIV/AIDS rate (%), Adults (15-49): 0.2; Malaria (Cases/
100,000): NA; TB (Cases/
100,000): 130; Human Development Index[B]: 105; Gross National Income 
per capita: (in U.S. dollars)[C]: 2,230.

Country[A]: Mongolia; Diseases being addressed by Fund grants: HIV/
AIDS, TB; Amount requested by approved grants for full length of 
programs: 4,727,103; HIV/AIDS rate (%), Adults (15-49): <.1; Malaria 
(Cases/
100,000): NA; TB (Cases/
100,000): 205; Human Development Index[B]: 113; Gross National Income 
per capita: (in U.S. dollars)[C]: 1,760.

Country[A]: Mozambique; Diseases being addressed by Fund grants: HIV/
AIDS, TB, Malaria; Amount requested by approved grants for full length 
of programs: 155,735,362; HIV/AIDS rate (%), Adults (15-49): 13; 
Malaria (Cases/
100,000): 4,120; TB (Cases/
100,000): 407; Human Development Index[B]: 170; Gross National Income 
per capita: (in U.S. dollars)[C]: 800.

Country[A]: Myanmar; Diseases being addressed by Fund grants: TB; 
Amount requested by approved grants for full length of programs: 
17,121,370; HIV/AIDS rate (%), Adults (15-49): NA; Malaria (Cases/
100,000): 254; TB (Cases/
100,000): 169; Human Development Index[B]: 127; Gross National Income 
per capita: (in U.S. dollars)[C]: NA.

Country[A]: Nepal; Diseases being addressed by Fund grants: HIV/AIDS, 
Malaria; Amount requested by approved grants for full length of 
programs: 18,840,210; HIV/AIDS rate (%), Adults (15-49): 0.5; Malaria 
(Cases/
100,000): 39; TB (Cases/
100,000): 209; Human Development Index[B]: 142; Gross National Income 
per capita: (in U.S. dollars)[C]: 1,370.

Country[A]: Nicaragua; Diseases being addressed by Fund grants: HIV/
AIDS, TB, Malaria; Amount requested by approved grants for full length 
of programs: 18,865,903; HIV/AIDS rate (%), Adults (15-49): 0.2; 
Malaria (Cases/
100,000): 392; TB (Cases/
100,000): 88; Human Development Index[B]: 118; Gross National Income 
per capita: (in U.S. dollars)[C]: 2,080.

Country[A]: Nigeria; Diseases being addressed by Fund grants: HIV/AIDS, 
TB, Malaria; Amount requested by approved grants for full length of 
programs: 137,655,309; HIV/AIDS rate (%), Adults (15-49): 5.8; Malaria 
(Cases/
100,000): 541; TB (Cases/
100,000): 301; Human Development Index[B]: 148; Gross National Income 
per capita: (in U.S. dollars)[C]: 800.

Country[A]: Pakistan; Diseases being addressed by Fund grants: HIV/
AIDS, TB, Malaria; Amount requested by approved grants for full length 
of programs: 21,619,750; HIV/AIDS rate (%), Adults (15-49): 0.1; 
Malaria (Cases/
100,000): 74; TB (Cases/
100,000): 177; Human Development Index[B]: 138; Gross National Income 
per capita: (in U.S. dollars)[C]: 1,860.

Country[A]: Rwanda; Diseases being addressed by Fund grants: HIV/AIDS, 
TB; Amount requested by approved grants for full length of programs: 
14,641,046; HIV/AIDS rate (%), Adults (15-49): 8.9; Malaria (Cases/
100,000): 13,237; TB (Cases/
100,000): 381; Human Development Index[B]: 162; Gross National Income 
per capita: (in U.S. dollars)[C]: 930.

Country[A]: Senegal; Diseases being addressed by Fund grants: HIV/AIDS, 
Malaria; Amount requested by approved grants for full length of 
programs: 18,857,142; HIV/AIDS rate (%), Adults (15-49): 0.5; Malaria 
(Cases/
100,000): 553; TB (Cases/
100,000): 258; Human Development Index[B]: 154; Gross National Income 
per capita: (in U.S. dollars)[C]: 1,480.

Country[A]: Sierra Leone; Diseases being addressed by Fund grants: TB; 
Amount requested by approved grants for full length of programs: 
5,698,557; HIV/AIDS rate (%), Adults (15-49): 7; Malaria (Cases/
100,000): 9,318; TB (Cases/
100,000): 274; Human Development Index[B]: 173; Gross National Income 
per capita: (in U.S. dollars)[C]: 480.

Country[A]: Somalia; Diseases being addressed by Fund grants: Malaria; 
Amount requested by approved grants for full length of programs: 
12,886,413; HIV/AIDS rate (%), Adults (15-49): 1; Malaria (Cases/
100,000): 102; TB (Cases/
100,000): 365; Human Development Index[B]: NA; Gross National Income 
per capita: (in U.S. dollars)[C]: NA.

Country[A]: Sudan; Diseases being addressed by Fund grants: TB, 
Malaria; Amount requested by approved grants for full length of 
programs: 76,319,734; HIV/AIDS rate (%), Adults (15-49): 2.6; Malaria 
(Cases/
100,000): 13,553; TB (Cases/
100,000): 195; Human Development Index[B]: 139; Gross National Income 
per capita: (in U.S. dollars)[C]: 1,520.

Country[A]: Tajikistan; Diseases being addressed by Fund grants: HIV; 
Amount requested by approved grants for full length of programs: 
2,425,245; HIV/AIDS rate (%), Adults (15-49): <.1; Malaria (Cases/
100,000): 295; TB (Cases/
100,000): 105; Human Development Index[B]: 112; Gross National Income 
per capita: (in U.S. dollars)[C]: 1,090.

Country[A]: Tanzania; Diseases being addressed by Fund grants: HIV/
AIDS, Malaria; Amount requested by approved grants for full length of 
programs: 28,683,718; HIV/AIDS rate (%), Adults (15-49): 7.8; Malaria 
(Cases/
100,000): 1,293; TB (Cases/
100,000): 340; Human Development Index[B]: 151; Gross National Income 
per capita: (in U.S. dollars)[C]: 520.

Country[A]: Togo; Diseases being addressed by Fund grants: HIV/AIDS; 
Amount requested by approved grants for full length of programs: 
19,882,903; HIV/AIDS rate (%), Adults (15-49): 6; Malaria (Cases/
100,000): 8,512; TB (Cases/
100,000): 313; Human Development Index[B]: 141; Gross National Income 
per capita: (in U.S. dollars)[C]: 1,410.

Country[A]: Uganda; Diseases being addressed by Fund grants: HIV/AIDS, 
TB, Malaria; Amount requested by approved grants for full length of 
programs: 96,719,638; HIV/AIDS rate (%), Adults (15-49): 5; Malaria 
(Cases/
100,000): 9,305; TB (Cases/
100,000): 343; Human Development Index[B]: 150; Gross National Income 
per capita: (in U.S. dollars)[C]: 1,210.

Country[A]: Ukraine; Diseases being addressed by Fund grants: HIV/AIDS; 
Amount requested by approved grants for full length of programs: 
92,152,744; HIV/AIDS rate (%), Adults (15-49): 1; Malaria (Cases/
100,000): NA; TB (Cases/
100,000): 73; Human Development Index[B]: 80; Gross National Income per 
capita: (in U.S. dollars)[C]: 3,700.

Country[A]: Vietnam; Diseases being addressed by Fund grants: HIV/AIDS, 
TB; Amount requested by approved grants for full length of programs: 
22,000,000; HIV/AIDS rate (%), Adults (15-49): 0.3; Malaria (Cases/
100,000): 95; TB (Cases/
100,000): 189; Human Development Index[B]: 109; Gross National Income 
per capita: (in U.S. dollars)[C]: 2,000.

Country[A]: Yemen; Diseases being addressed by Fund grants: Malaria; 
Amount requested by approved grants for full length of programs: 
11,878,206; HIV/AIDS rate (%), Adults (15-49): 0.1; Malaria (Cases/
100,000): 15,202; TB (Cases/
100,000): NA; Human Development Index[B]: 144; Gross National Income 
per capita: (in U.S. dollars)[C]: 770.

Country[A]: Zambia; Diseases being addressed by Fund grants: HIV/AIDS, 
TB, Malaria; Amount requested by approved grants for full length of 
programs: 191,967,000; HIV/AIDS rate (%), Adults (15-49): 21.5; Malaria 
(Cases/
100,000): 26,260; TB (Cases/
100,000): 495; Human Development Index[B]: 153; Gross National Income 
per capita: (in U.S. dollars)[C]: 750.

Country[A]: Zimbabwe; Diseases being addressed by Fund grants: HIV/
AIDS, Malaria; Amount requested by approved grants for full length of 
programs: 22,977,500; HIV/AIDS rate (%), Adults (15-49): 33.7; Malaria 
(Cases/
100,000): 9,429; TB (Cases/
100,000): 562; Human Development Index[B]: 128; Gross National Income 
per capita: (in U.S. dollars)[C]: 2,550.

Country[A]: Lower middle income ; Amount requested by approved grants 
for full length of programs: [Empty]; HIV/AIDS rate (%), Adults (15-49): [Empty]; 
Malaria (Cases/
100,000): [Empty]; TB (Cases/
100,000): [Empty]; Human Development Index[B]: [Empty]; Gross National 
Income per capita: (in U.S. dollars)[C]: [Empty].

Country[A]: Bulgaria; Diseases being addressed by Fund grants: HIV/
AIDS; Amount requested by approved grants for full length of programs: 
15,711,885; HIV/AIDS rate (%), Adults (15-49): <.1; Malaria (Cases/
100,000): NA; TB (Cases/
100,000): 46; Human Development Index[B]: 62; Gross National Income per 
capita: (in U.S. dollars)[C]: 5,560.

Country[A]: China; Diseases being addressed by Fund grants: TB, 
Malaria; Amount requested by approved grants for full length of 
programs: 54,476,659; HIV/AIDS rate (%), Adults (15-49): 0.1; Malaria 
(Cases/
100,000): 1; TB (Cases/
100,000): 103; Human Development Index[B]: 96; Gross National Income 
per capita: (in U.S. dollars)[C]: 3,920.

Country[A]: Cuba; Diseases being addressed by Fund grants: HIV/AIDS; 
Amount requested by approved grants for full length of programs: 
26,152,827; HIV/AIDS rate (%), Adults (15-49): <.1; Malaria (Cases/
100,000): NA; TB (Cases/
100,000): 15; Human Development Index[B]: 55; Gross National Income per 
capita: (in U.S. dollars)[C]: NA.

Country[A]: Dominican Republic; Diseases being addressed by Fund 
grants: HIV/AIDS; Amount requested by approved grants for full length 
of programs: 48,484,482; HIV/AIDS rate (%), Adults (15-49): 2.5; 
Malaria (Cases/
100,000): 12; TB (Cases/
100,000): 135; Human Development Index[B]: 94; Gross National Income 
per capita: (in U.S. dollars)[C]: 5,710.

Country[A]: Ecuador; Diseases being addressed by Fund grants: HIV/AIDS; 
Amount requested by approved grants for full length of programs: 
14,104,108; HIV/AIDS rate (%), Adults (15-49): 0.3; Malaria (Cases/
100,000): 683; TB (Cases/
100,000): 172; Human Development Index[B]: 93; Gross National Income 
per capita: (in U.S. dollars)[C]: 2,910.

Country[A]: Egypt, (Arab Republic of); Diseases being addressed by Fund 
grants: TB; Amount requested by approved grants for full length of 
programs: 4,032,014; HIV/AIDS rate (%), Adults (15-49): <.1; Malaria 
(Cases/
100,000): NA; TB (Cases/
100,000): 39; Human Development Index[B]: 115; Gross National Income 
per capita: (in U.S. dollars)[C]: 3,670.

Country[A]: El Salvador; Diseases being addressed by Fund grants: HIV/
AIDS, TB; Amount requested by approved grants for full length of 
programs: 26,912,923; HIV/AIDS rate (%), Adults (15-49): 0.6; Malaria 
(Cases/
100,000): NA; TB (Cases/
100,000): 67; Human Development Index[B]: 104; Gross National Income 
per capita: (in U.S. dollars)[C]: 4,410.

Country[A]: Honduras; Diseases being addressed by Fund grants: ALL; 
Amount requested by approved grants for full length of programs: 
41,119,903; HIV/AIDS rate (%), Adults (15-49): 1.6; Malaria (Cases/
100,000): 547; TB (Cases/
100,000): 92; Human Development Index[B]: 116; Gross National Income 
per capita: (in U.S. dollars)[C]: 2,400.

Country[A]: Iran, (Islamic Republic of); Diseases being addressed by 
Fund grants: HIV/AIDS; Amount requested by approved grants for full 
length of programs: 15,922,855; HIV/AIDS rate (%), Adults (15-49): <.1; 
Malaria (Cases/
100,000): 33; TB (Cases/
100,000): 54; Human Development Index[B]: 98; Gross National Income per 
capita: (in U.S. dollars)[C]: 5,910.

Country[A]: Jordan; Diseases being addressed by Fund grants: HIV/AIDS; 
Amount requested by approved grants for full length of programs: 
2,483,900; HIV/AIDS rate (%), Adults (15-49): <.1; Malaria (Cases/
100,000): NA; TB (Cases/
100,000): 11; Human Development Index[B]: 99; Gross National Income per 
capita: (in U.S. dollars)[C]: 3,950.

Country[A]: Kazakhstan; Diseases being addressed by Fund grants: HIV/
AIDS; Amount requested by approved grants for full length of programs: 
22,360,000; HIV/AIDS rate (%), Adults (15-49): 0.1; Malaria (Cases/
100,000): NA; TB (Cases/
100,000): 130; Human Development Index[B]: 79; Gross National Income 
per capita: (in U.S. dollars)[C]: 5,490.

Country[A]: Morocco; Diseases being addressed by Fund grants: HIV/AIDS; 
Amount requested by approved grants for full length of programs: 
9,238,754; HIV/AIDS rate (%), Adults (15-49): 0.1; Malaria (Cases/
100,000): NA; TB (Cases/
100,000): 119; Human Development Index[B]: 123; Gross National Income 
per capita: (in U.S. dollars)[C]: 3,450.

Country[A]: Namibia; Diseases being addressed by Fund grants: HIV/AIDS, 
TB, Malaria; Amount requested by approved grants for full length of 
programs: 113,157,021; HIV/AIDS rate (%), Adults (15-49): 22.5; Malaria 
(Cases/
100,000): 2,556; TB (Cases/
100,000): 490; Human Development Index[B]: 122; Gross National Income 
per capita: (in U.S. dollars)[C]: 6,410.

Country[A]: Peru; Diseases being addressed by Fund grants: HIV/AIDS, 
TB; Amount requested by approved grants for full length of programs: 
50,177,054; HIV/AIDS rate (%), Adults (15-49): 0.4; Malaria (Cases/
100,000): 257; TB (Cases/
100,000): 228; Human Development Index[B]: 82; Gross National Income 
per capita: (in U.S. dollars)[C]: 4,660.

Country[A]: Philippines; Diseases being addressed by Fund grants: TB, 
Malaria; Amount requested by approved grants for full length of 
programs: 23,267,609; HIV/AIDS rate (%), Adults (15-49): <.1; Malaria 
(Cases/
100,000): 15; TB (Cases/
100,000): 314; Human Development Index[B]: 77; Gross National Income 
per capita: (in U.S. dollars)[C]: 4,220.

Country[A]: Romania; Diseases being addressed by Fund grants: HIV/AIDS, 
TB; Amount requested by approved grants for full length of programs: 
48,360,586; HIV/AIDS rate (%), Adults (15-49): <.1; Malaria (Cases/
100,000): NA; TB (Cases/
100,000): 130; Human Development Index[B]: 63; Gross National Income 
per capita: (in U.S. dollars)[C]: 6,360.

Country[A]: Serbia (Yugoslavia); Diseases being addressed by Fund 
grants: HIV; Amount requested by approved grants for full length of 
programs: 3,575,512; HIV/AIDS rate (%), Adults (15-49): NA; Malaria 
(Cases/
100,000): NA; TB (Cases/
100,000): NA; Human Development Index[B]: NA; Gross National Income per 
capita: (in U.S. dollars)[C]: NA.

Country[A]: South Africa; Diseases being addressed by Fund grants: HIV/
AIDS, TB; Amount requested by approved grants for full length of 
programs: 190,388,018; HIV/AIDS rate (%), Adults (15-49): 20.1; Malaria 
(Cases/
100,000): 83; TB (Cases/
100,000): 495; Human Development Index[B]: 107; Gross National Income 
per capita: (in U.S. dollars)[C]: 9,160.

Country[A]: Sri Lanka; Diseases being addressed by Fund grants: TB, 
Malaria; Amount requested by approved grants for full length of 
programs: 14,505,200; HIV/AIDS rate (%), Adults (15-49): <.1; Malaria 
(Cases/
100,000): 1,402; TB (Cases/
100,000): 59; Human Development Index[B]: 89; Gross National Income per 
capita: (in U.S. dollars)[C]: 3,460.

Country[A]: Swaziland; Diseases being addressed by Fund grants: HIV/
AIDS, Malaria; Amount requested by approved grants for full length of 
programs: 56,736,900; HIV/AIDS rate (%), Adults (15-49): 33.4; Malaria 
(Cases/
100,000): 300; TB (Cases/
100,000): 564; Human Development Index[B]: 125; Gross National Income 
per capita: (in U.S. dollars)[C]: 4,600.

Country[A]: Thailand; Diseases being addressed by Fund grants: HIV/
AIDS, TB, Malaria; Amount requested by approved grants for full length 
of programs: 209,635,201; HIV/AIDS rate (%), Adults (15-49): 1.8; 
Malaria (Cases/
100,000): 199; TB (Cases/
100,000): 141; Human Development Index[B]: 70; Gross National Income 
per capita: (in U.S. dollars)[C]: 6,320.

Country[A]: Upper middle income ; Amount requested by approved grants 
for full length of programs: [Empty]; HIV/AIDS rate (%), Adults (15-49): [Empty]; 
Malaria (Cases/
100,000): [Empty]; TB (Cases/
100,000): [Empty]; Human Development Index[B]: [Empty]; Gross National 
Income per 
capita: (in U.S. dollars)[C]: [Empty].

Country[A]: Argentina; Diseases being addressed by Fund grants: HIV/
AIDS; Amount requested by approved grants for full length of programs: 
28,756,200; HIV/AIDS rate (%), Adults (15-49): 0.7; Malaria (Cases/
100,000): NA; TB (Cases/
100,000): 55; Human Development Index[B]: 34; Gross National Income per 
capita: (in U.S. dollars)[C]: 12,050.

Country[A]: Botswana; Diseases being addressed by Fund grants: HIV/
AIDS; Amount requested by approved grants for full length of programs: 
18,580,414; HIV/AIDS rate (%), Adults (15-49): 38.8; Malaria (Cases/
100,000): 4,467; TB (Cases/
100,000): 702; Human Development Index[B]: 126; Gross National Income 
per capita: (in U.S. dollars)[C]: 7,170.

Country[A]: Chile; Diseases being addressed by Fund grants: HIV/AIDS; 
Amount requested by approved grants for full length of programs: 
38,151,562; HIV/AIDS rate (%), Adults (15-49): 0.3; Malaria (Cases/
100,000): NA; TB (Cases/
100,000): 26; Human Development Index[B]: 38; Gross National Income per 
capita: (in U.S. dollars)[C]: 9,100.

Country[A]: Costa Rica; Diseases being addressed by Fund grants: HIV/
AIDS; Amount requested by approved grants for full length of programs: 
4,202,362; HIV/AIDS rate (%), Adults (15-49): 0.6; Malaria (Cases/
100,000): 50; TB (Cases/
100,000): 17; Human Development Index[B]: 43; Gross National Income per 
capita: (in U.S. dollars)[C]: 7,980.

Country[A]: Croatia; Diseases being addressed by Fund grants: HIV/AIDS; 
Amount requested by approved grants for full length of programs: 
4,945,192; HIV/AIDS rate (%), Adults (15-49): <.1; Malaria (Cases/
100,000): NA; TB (Cases/
100,000): 61; Human Development Index[B]: 48; Gross National Income per 
capita: (in U.S. dollars)[C]: 7,960.

Country[A]: Estonia; Diseases being addressed by Fund grants: HIV/AIDS; 
Amount requested by approved grants for full length of programs: 
10,246,580; HIV/AIDS rate (%), Adults (15-49): 1; Malaria (Cases/
100,000): NA; TB (Cases/
100,000): 61; Human Development Index[B]: 42; Gross National Income per 
capita: (in U.S. dollars)[C]: 9,340.

Country[A]: Panama; Diseases being addressed by Fund grants: TB; Amount 
requested by approved grants for full length of programs: 570,000; HIV/
AIDS rate (%), Adults (15-49): 1.5; Malaria (Cases/
100,000): 34; TB (Cases/
100,000): 54; Human Development Index[B]: 57; Gross National Income per 
capita: (in U.S. dollars)[C]: 5,680.

Sources: the Fund; Joint U.N. Program on HIV/AIDS, Report of the Global 
HIV/AIDS Epidemic, 2002; World Health Organization data on malaria 
cases (data from varying years, based on latest year for which 
information available); World Bank, World Development Indicators, 2002; 
U.N. Development Program, Human Development Report, 2002.

Note: "NA" indicates that the information is not available.

[A] Although each country is listed only once, many countries received 
multiple grants. All grants received have been accounted for when 
noting disease programs addressed and dollar amount requested by 
approved programs. This table includes only grants for individual 
countries. Multicountry grants are not included.

[B] The Human Development Index is reported by the U.N. Development 
Program. It measures a country's achievements in terms of life 
expectancy, education level attained and adjusted real income.

[C] Purchasing Power Parity method.

[End of table]

[End of section]

Appendix V: Comments from the Global Fund to Fight AIDS, TB and Malaria:

THE GLOBAL FUND to Fight AIDS, Tuberculosis and Malaria:

28 April 2003:

David Gootnick:

Director, International Affairs and Trade United States General 
Accounting Office Washington, DC 20548:

United States of America:

Dear Mr. Gootnick,

Thank you for sharing the draft report on the Global Fund: Global Fund 
to Fight AIDS, TB and Malaria Has Advanced In KeyAreas but Difficult 
Challenges Remain. The GAO report is a constructive, forward-looking 
analysis that will contribute to improved near-term performance of the 
Global Fund as well as the sustained success of the programs it 
supports.

Your findings reflect both the substantial progress and the growing 
pains inherent in the start up of a new organization. In its first 
year, the Global Fund balanced the imperative to demonstrate results 
with the necessity of putting in place basic:

policies, physical and human infrastructure, and systems to move money. 
The analysis also reflects the challenge of resolving some underlying 
tensions in the principles of a more effective response to AIDS, TB and 
malaria: finding the right mix of accountability and efficiency in 
disbursement mechanisms; being innovative while building on proven 
existing efforts and models; and moving quickly while assuring quality 
and due diligence.

The Global Fund represents an opportunity to reconcile these apparent 
dualities and, in so doing, to contribute dramatically to improved 
health outcomes for the world's most disadvantaged. The partners who 
constitute the Global Fund have therefore embraced its mandate, aware 
of the obstacles, but committed to rapid solutions and ongoing course 
corrections. In that spirit, I provide below information on how the 
Global Fund is responding to the challenges identified and highlight an 
additional challenge that your report does not emphasize related to the 
Fund's monitoring and evaluation efforts.

Governance structures and related challenges to fund disbursement:

In this section of the report, you assert the need to improve the 
effectiveness of CCMs through more clearly defined roles, broader 
composition and improved processes. While I agree with this assertion, 
it is important to acknowledge that the current performance of CCMs 
already represents significant progress in broadening and strengthening 
local ownership of public health and development programs.

Based on an analysis of 91 CCMs that submitted proposals in Round 2, 
the average portion of CCM composition drawing from "civil society" 
(including non-governmental organizations, faith-based organizations, 
academic institutions, communities living with the diseases and the 
private sector) was 44%. Of all CCMs submitting in Round 2, 99% 
included at least one representative of NGOs and community-based 
organizations. And 46% of funds approved in Round 2 is allocated to 
civil society for expenditure during program implementation.

Such figures are unprecedented, and they are coupled with anecdotal 
evidence of better CCM performance over time. This has been the natural 
consequence of increased interaction with the Global Fund to negotiate 
Grant Agreements, the mobilization of CCMs to develop new proposals to 
the Global Fund, support from bilateral and multilateral partners in 
building capacity, the sharing of good practices among CCMs at regional 
workshops held by the Global Fund, and pressure from civil society 
demanding that CCMs live up to responsibilities for inclusiveness and 
transparency.

Notwithstanding this notable progress, the Global Fund must continue to 
encourage still better CCM performance as quickly as possible. Local 
partnerships, which CCMs represent, are at the heart of the Global 
Fund's success and they are the ultimate "owners" of approved programs. 
The Global Fund is pursuing at least three strategies to strengthen 
CCMs:

* Transparent communications and critique. Correspondence from the 
Global Fund to CCMs is increasingly copied to all members of CCMs, as 
the Secretariat confirms the necessary contact information. The Global 
Fund is considering mechanisms which would ensure that the full 
membership of CCMs has the opportunity to review documentation produced 
by PRs. Such documentation, including disbursement requests and 
progress reports, certainly will be posted publicly on our website, for 
all members of CCMs to access. Also to be posted are independent, 
evidence-based critiques of CCMs, such as those mentioned in the GAO 
report. The Secretariat has commissioned additional studies of this 
type. I also intend that our website will become a forum for the 
sharing of best practices.

* Supportive partnerships. While the Global Fund cannot invest its own 
staff or funds to assist CCMs directly, our partners can make such 
investments. Multilateral agencies, particularly UNAIDS and the World 
Health Organization (WHO), are well represented on CCMs and provide 
financial assistance specifically for outreach to NGOs. Bilateral 
agencies also provide support, and USAID alone participated in 26% of 
CCMs submitting to Round 2. Gesellschaft fur Technische Zusammenarbeit 
GmbH (GTZ), the German agency for international cooperation, has 
committed	25 million towards strengthening the ability of local partners 
to access the Global Fund; this includes a dedicated bilateral channel 
to fund support of CCMs. From the private sector, the Glaser Progress 
Foundation has made grants to Columbia University's Access Project, 
which provides similar direct support in selected countries. Other 
examples exist and are in development.

* Affirmation of ongoing responsibilities. As referenced in the report, 
the Global Fund has noted explicitly in Grant Agreements the expected 
role of CCMs throughout the duration of proposal implementation. This 
includes integrating Global Fund-financed programs into national 
strategies, encouraging accountability through broad scrutiny of 
progress, and leveraging existing and incipient monitoring and 
evaluation systems to support data collection and systematic 
surveillance. Continued clarity of these roles - and, if possible, 
evaluation of CCM performance vis-a-vis the functions specified - will 
be pursued further in future Board discussions on CCM policies.

This section of the report also correctly characterizes the procedural 
delays and uncertainties concerning accountabilities and 
responsibilities resulting from the Global Fund's administrative 
relationship with the WHO. While this relationship has been important 
to the Global Fund in its first year of operation and improvements are 
being made, important near-term and longer-term issues concerning the 
autonomy and legal status of the Global Fund remain to be resolved.

Oversight systems, procurement guidance and monitoring & evaluation of 
grants:

In this section, you fairly describe the initial debate associated with 
the LFA model. The controversy associated with the introduction of 
LFAs, particularly private ones, was an outcome of both the pace of 
implementation and degree of innovation of the Global Fund's oversight 
architecture. The role of LFAs has since been clarified to the greater 
comfort of both recipients and donors. We now see improved 
understanding of the indigenous nature of the LFAs selected. For 
example, PriceWaterhouseCoopers in Tanzania is staffed entirely by East 
Africans and does indeed contribute to the local private sector. In 
addition, greater trust in the process of selecting LFAs has been 
engendered by the announcement of an international request for 
proposals or tender to select the most qualified organizations. 
Evidence of growing credibility with existing LFAs is seen with Round 2 
recipients agreeing to move PR assessments forward with the originally 
selected LFAs while the international tender proceeds. Moreover, the 
LFAs themselves are improving the quality of services they offer by 
applying lessons learnt from their experiences and hiring the relevant 
expertise necessary (for example, in drug procurement) to perform 
agreed functions. Having said this, I recognize that the LFA role and 
the organizations that perform it need to evolve further in the light 
of experience.

On the issue of procurement, also discussed in this section, I would 
like to clarify the status of topics that the report states are 
outstanding. The Global Fund's Framework Document and supporting 
procurement policies specify Board-agreed principles on procurement and 
modalities for their operationalization. They state clearly that only 
proposals that are consistent with international law and agreements 
(such as TRIPS) should be supported by the Global Fund. The Global Fund 
will be taking further measures to prevent or report any violations of 
this principle.

The GAO raises three other important issues related to procurement. The 
solicitation and acceptance of in-kind donations requires process-
related policies on how the Global Fund would channel and value such 
resources; these will only be pursued after the Board is
satisfied that the potential financial worth of these donations 
outweighs the costs of
administering them. This analysis is being coordinated by two of our 
Board committees, assisted by a pro bono team of consultants 
commissioned by the Private Sector Board Delegation. Secondly, the 
issue of price premiums to encourage domestic production of medications 
is resolved. Consistent with the decisions of the last Board Meeting, 
the Board has sanctioned no such premiums. The last issue of taxes and 
duties has also been resolved and is not outstanding. The last Board 
Meeting adopted a revised policy on this subject stating that, "The 
Global Fund strongly encourages the relevant national authorities in 
recipient countries to exempt from duties and taxes all products 
financed by Global Fund grants and procured by NGOs or any other 
Principal Recipient or sub-recipient." This provides flexibility in 
cases where the PR is a non-government entity. That said, the 
Secretariat is negotiating on a case-by-case basis with governments in 
recipient countries to declare Global Fund-financed purchases exempt of 
such taxes.

The progress in adopting these policies has, for me, demonstrated an 
important ingredient in the Global Fund's success: that debates on 
critical issues are based on the active engagement of experts from 
donors, recipients, NGOs and the private sector and that agreement is 
reached quickly in almost all cases. The full range of stakeholders has 
expressed confidence in this process. More importantly, the market has 
responded to both the policies and the volumes of purchases approved, 
with deeper discounts on drugs and broadened eligibility for such 
discounts. Moreover, quality assurance measures by partners are 
expanding to meet the need of the Global Fund's recipients, as are 
regional and global procurement cooperatives, which enable competitive 
pricing and expanded access. While _ great challenges remain to expand 
access, I believe substantial strides forward have been made.

A final topic raised in this section of your report is the Global 
Fund's system of monitoring and evaluation. I appreciate that the GAO 
concludes that the system developed is detailed and responsible, but I 
am not satisfied with our performance thus far. It is true that:

we have made progress in designing our monitoring and evaluation 
systems. But this means little if it cannot be effectively implemented 
at the country level. I would add two significant challenges to those 
you have listed:

Requiring regular yet light reporting. The commitment of the Global 
Fund to performance-based disbursement requires regular reporting by 
grantees of their progress. At the same time, the Global Fund faces an 
imperative not to over-burden recipients with the administration of 
such requirements. Recipients are required to report progress in 
regular disbursement requests, which are simple, streamlined documents 
that provide essential information on outputs achieved - primarily 
against "process" and "coverage" (referred to in your report as 
"outcome") indicators and associated expenditure - to justify the need 
for further disbursements from the Global Fund. These will be verified 
by the LFA. Less frequent and more substantive reports on progress will 
be required also. Performance measures, whether reported frequently for 
disbursement or annually for evaluation, will align with other donor 
reporting requirements and longer-term international monitoring and 
evaluation frameworks, including those of the Millennium Development 
Goals and the UN General Assembly Special Session on HIV/AIDS, which 
require more systematic surveillance of particular indicators.

* Turning off the tap. The Global Fund will soon be required to 
interrupt the flow of funds to those recipients whose disbursement 
requests do not show adequate progress. This is far from a 
straightforward process. To do so fairly requires a transparent 
calculus of what is "adequate", an ability to discern when performance 
is strong even when milestones are not fully met, and a mechanism to 
not penalize parts of a broad program that are successful when others 
are not. The Global Fund will not be able to do this perfectly at the 
start, but it quickly must initiate a system that is regarded as fair 
by recipients and accountable by donors. The overriding principle of 
performance-based disbursement will again guide us in this task. In 
such cases that performance is inadequate, the Global Fund will require 
compelling corrective action following decisions to suspend 
disbursements. Monies will not flow until the Fund receives evidence of 
such actions. Grantees will have every incentive to correct 
deficiencies knowing that swift recommencement of funding will occur 
once performance has improved.

While the concept of performance-based grant making is not new, the 
Global Fund is pioneering practical systems to implement it. As most 
grant making only commenced in 2003, these systems for performance 
measurement and disbursement are yet to be tested. The lessons learned 
in the near term will guide not only the continued design and 
implementation of our operations but also those of other foundations 
and development finance institutions that aspire to fund on the basis 
of results.

Resource mobilization:

You have represented well the enormous task ahead for the Global Fund 
to raise money to meet its current and future commitments. This is our 
single most important challenge. While the Fund's current commitments 
are a contribution towards the global resource gap for AIDS, TB and 
malaria (in 2003, the commitments of the Fund may close 10% of this 
divide), we are a long way from having raised the resources required. 
These diseases rage out of control, causing devastation and 
destabilization in many African countries and threatening to do the 
same in China, India and Russia. Immediate, courageous and large-scale 
action is required and this costs a lot of money. It will also save 
money down the line, as investment now avoids the magnitude of cost in 
the future that will otherwise be associated with worsened epidemics. 
While my colleagues at the Global Fund work to get money to grantees 
and assure that it is effectively used, I - along with many tireless 
advocates - am on a relentless path to find new money.

To date, the United States has led the way in giving, acting as a 
beacon for others. I am grateful for such leadership and support. 
However, relative to need, current pledges are insufficient to enable 
the Global Fund to respond adequately to the scope of this crisis. 
According to current projections - which will be revised consistently 
on the basis of what the Fund actually receives and approves - donors 
have pledged 33% of the need for calendar years 2002-2004, with the US 
pledge amounting to add at least 12% (assuming minimum contribution for 
FY2004 is US$ 200 million). Thankfully, our most able donors, the G8, 
meet in one months time to discuss how they can continue to address 
this challenge, along with the Global Fund's many other supporters and 
donors. I hope and expect that the US will continue to ensure that its 
contribution represents a "fair share" relative to the total
commitments to the Fund, potentially through a "challenge grant" 
mechanism as we await the new and renewed pledges of other donors.

I am convinced that sufficient resources will be raised to allow the 
Global Fund's financial assistance to reach a level that significantly 
contributes to stemming the tide of devastation which we are 
witnessing. In your report, you draw attention to the fact that each 
proposal round creates long-term obligations. While the amount of those 
obligations, which will renew two year grants, will vary as operational 
plans are revised after initial implementation and any unexpended funds 
reduce the amount requested for subsequent years, we recognize the risk 
associated with commencing programs for which indefinite financing is 
not immediately guaranteed. It is a necessary risk, however, to meet 
the upfront and urgent need in affected communities. The faster and 
more effectively we fight this fire, the sooner it will burn out. It is 
imperative to understand that underinvestment today only prolongs and 
expands funding demands tomorrow. These diseases are fueled by neglect 
and denial. They are doused by bold, quick, large-scale and 
comprehensive action.

Grant-making and effective resource use:

This section usefully highlights the grant making process and 
underscores the challenges of ensuring effective resource use. Here, I 
emphasize the Global Fund principles concerning additionality and 
absorptive capacity.

Additionality is important to assure at both donor and recipient 
levels. On the donor side, this affirms the need, in our resource 
mobilization efforts, to pursue sources of finance beyond existing ODA 
budgets and is why the Global Fund is actively supporting efforts 
including the UK International Finance Facility, the Italian De-Tax 
Programme and unblocking of part of the European Development Fund. Also 
important to donors is the need to ensure additionality among allocated 
funds, which is why coordination among investments is critical as the 
Global Fund is joined by other major initiatives. Of particular note is 
the President's Emergency Plan for AIDS Relief which will invest in 14 
highly affected countries, 13 of which have been approved in the Global 
Fund's first two proposal rounds for US$ 400 million over 2 years (up 
to $1.1 billion over 5 years) to fight AIDS alone.

On the recipient side, I reaffirm that the Global Fund is committed to 
ensuring additionality. As you note, in one approved country in Africa, 
an official stated forthrightly that the Global Fund's dollars would 
not be additional to the overall health budget, and the Secretariat 
halted its grant agreement negotiations until the government of that 
country committed to ensuring additionality. More procedurally, the 
Global Fund negotiates agreements with a view to ensuring financial 
flows and accounting that do not enable the grants to be counted 
against national budgets. In at least two countries, this has resulted 
in adapting the proposed fiscal mechanisms. While catching these cases 
is a challenge, we are prepared to act robustly when aware of threats 
to additionality.

Further, grant expenditures and recipients' progress reports will be 
available publicly through our website, which will encourage 
stakeholders within recipient countries to hold CCMs and governments 
accountable for the money granted and the additionality promised. 
Moreover, our international partners, especially UNAIDS in the case of 
HIV/AIDS, are
making substantial efforts to track resource flows in these countries, 
so there can be objective third-party analysis to assess additionality 
over time.

This section also raises the challenge of absorptive capacity, which 
will surely be a challenge for all stakeholders committed to fighting 
these diseases in the years to come. Developing countries clearly have 
today substantially more capacity to fight AIDS, TB and malaria than is 
being effectively utilized by local and international finance. That 
said, they do have human and physical capacity shortages that challenge 
program implementations. Countries themselves recognize this, as 
illustrated by the fact that nearly 50% of the funds approved by the 
Global Fund are for physical and human infrastructure, with half of 
that share being specifically for the recruitment, compensation and 
training of personnel.

The Global Fund is looking at multiple ways to avoid overwhelming 
country capacity. For example, the TRP will include as a factor in its 
adjudication of proposals the track record of the applicant in spending 
money awarded in previous grants from the Global Fund. The Global Fund 
is also encouraging approved applicants to adopt structures that will 
enable expenditure, such as the use of both public and private PRs for 
public and private spending in country. More importantly, we are 
working with our partners - bilateral and multilateral agencies, NGOs, 
foundations and corporations - to ensure the availability of relevant 
capacity: including technical assistance, management expertise, 
training, and procurement services. Their ability to provide this 
direct support to implementation is a critical element to the success 
of grantees being able to maximize the use of their resources.

In conclusion, I am impressed with your team's ability, to capture our 
successes and specify our challenges. You have provided those who 
should judge us with accurate information. Your report describes well 
the work of the Global Fund and provides sobering data on the 
challenges faced by all of us in responding more effectively to AIDS, 
TB and malaria.

We have no option other than to mount a response to these three 
pandemics that is far larger, bolder and more comprehensive than 
anything attempted hitherto. The Global Fund was established to be 
major part of this response. Together we must succeed.

With kind regards,

Professor Richard G.A. Feachem, CBE, FREng, DSc(Med) Executive 
Director:

The Global Fund to Fight AIDS, Tuberculosis and Malaria:

Signed by Richard G.A. Feachem

[End of section]

Appendix VI: Joint Comments from the Departments of Health and Human 
Services and State, and the U.S. Agency for International Development:

April 28, 2003:

Dear Mr. Gootnick:

We appreciate the opportunity to comment on the draft General 
Accounting Office (GAO) report, Global Fund to Fight AIDS, TB and 
Malaria Has Advanced in Key Areas but Difficult Challenges Remain, GAO 
Code 320120.

The Department of State, the Department of Health and Human Services 
and the United States Agency for International Development concur with 
the overall conclusion reflected in the report's title. The Fund has 
made remarkable progress in establishing key structures based on the 
principles of partnership and coordination at global and country 
levels, designing new mechanisms to assure accountability and 
transparency, and independently vetting and approving proposals in a 
very short period of time. Of particular note is the Fund's emphasis on 
balancing donor/recipient, and public/non-governmental interests.

However, much remains to be done. Over the coming year, the Fund must 
put its principles into practice as implementation begins and money 
flows to recipients. The Fund will be challenged to strike a balance 
between awarding grants quickly, while still ensuring accountability, 
and strengthening the systems necessary to document results achieved. 
The Fund must take advantage of all opportunities to explain, clarify, 
and clearly communicate the respective roles and responsibilities, 
particularly at the country level, of the new structures developed.

We note that some of the described challenges, such as demonstrating 
that pledges to the Fund and the grants the Fund gives out are 
additional to existing resource flows and effectively dealing with 
issues of absorptive capacity, affect many donor and national programs, 
and are not unique to the Global Fund. These challenges are at the 
heart of the establishment of the Fund as a public-private partnership 
with the mandate to mobilize additional resources and strengthen the 
relationships necessary to better coordinate programs.

The need to build capacity to be able to take advantage of increased 
resources from many sources, requires the combined efforts of bilateral 
and multilateral agencies to do more in their own programs to support 
the Fund. All parties associated with the Fund agree that it is not in 
a position itself to provide technical assistance and training, 
particularly if the Secretariat is to remain limited in size.

The Fund remains a center of great interest and comment in public fora, 
and within the donor and health development communities. The three 
agencies believe that this report will be useful not only to the Fund 
Secretariat but also to the Fund's Board, the U.S. delegation, and the 
general public.

Sincerely,

Christopher Burnham,

Assistant Secretary for Resource Management and Chief Financial Officer
U.S. Department of State:

Signed by Christopher Burnham

Janet Rehnquist 
Inspector General Department of Health and Human Services*:

Signed for Janet Rehnquist

John Marshall 

Assistant Administrator Bureau for Management U.S. Agency 
for International Development:

Signed by John Marshall

Mr. David Gootnick, Director, International Affairs and Trade,

U.S. General Accounting Office:

*The Office of Inspector General (OIG) is transmitting the department's 
response to this draft report in our capacity as the department's 
designated focal point and coordinator for General Accounting Office 
reports. The OIG has not conducted an independent assessment of these 
comments and therefore expresses no opinion on them.


[End of section]

Appendix VII: GAO Contact and Staff Acknowledgments:

GAO Contact:

Thomas Melito, (202) 512-9601:

Staff Acknowledgments:

In addition to the persons named above, Sharla Draemel, Stacy Edwards, 
Kay Halpern, Reid Lowe, William McKelligott, Mary Moutsos, and Tom 
Zingale made key contributions to this report.

:

(320120):


FOOTNOTES

[1] Through fiscal year 2003 the United States had appropriated up to 
$650 million to the Fund and has pledged an additional $1 billion over 
5 years, beginning in 2004.

[2] We do not name individual countries in the text of this report, 
given the early stages of Fund activities in these countries. Of these 
four countries, Haiti and Tanzania were selected as two of the "fast 
track" countries that were close to having signed grant agreements 
during our field visits. Ethiopia and Honduras were less far along in 
the process and therefore represent most of the remaining countries 
that had proposals approved in the first round vetted by the Fund. 

[3] This country total does not include one global grant and grants to 
two regions. 

[4] According to the Fund, Swiss authorities generally require that a 
Swiss citizen with his or her domicile in Switzerland sit on the board 
of directors of a foundation registered in Switzerland. The Fund is a 
foundation registered in Switzerland.

[5] About half of these staff have been hired for 2-year terms; five 
have been seconded from other organizations; and the rest have been 
hired for shorter lengths of time. The secretariat has budgeted for 73 
full-time staff.



[6] TRP members generally agree to serve for 2 years; members rotate at 
different times to ensure continuity. 

[7] UNAIDS consists of eight cosponsors: U.N. Children's Fund, U.N. 
Development Program, U.N. Population Fund, U.N. International Drug 
Control Program, International Labor Organization, U.N. Educational, 
Scientific, and Cultural Organization, WHO, and the World Bank.



[8] An additional component of the governance structure, the 
Partnership Forum, will be made up of stakeholders concerned about the 
prevention, care, treatment and eventual eradication of HIV/AIDS, 
tuberculosis and malaria. It will meet every 2 years to provide views 
on the Fund's policies and strategies. 



[9] In addition, one grant agreement is with a private sector entity 
and the principal recipient for another has yet to be determined.

[10] According to World Bank and Fund officials, the Bank is serving as 
the local fund agent for a TB project in India due to unique 
circumstances pertaining to this project.

[11] NGO Participation in the Global Fund, a Review Paper, 
International HIV/AIDS Alliance, October 2002.



[12] The Fund notes that the information provided by CCMs during the 
first proposal round was not detailed enough to extract this data and 
that most CCMs from round one resubmitted proposals in the second 
round. Two CCMs from areas experiencing long-running conflict were 
excluded from this analysis. 

[13] Global Fund Update for NGOs and Civil Society, June 2002.

[14] The Fund has approved a few proposals from NGOs that were 
submitted outside the CCM process. According to Fund guidance, NGOs are 
currently allowed to apply outside the CCM process in exceptional 
circumstances, for example, in countries or regions where conflict has 
incapacitated local government and other structures or where no CCM 
existed.

[15] These guidelines include, among others, making sure that certain 
sectors and institutions are represented on the CCM, including the 
ministry of finance, multilateral development banks, religious 
organizations, academic entities, and the private sector. In addition, 
no more than half the CCM's membership should consist of members of 
public sector institutions (e.g., host country government officials and 
officials from bilateral or multilateral agencies). The guidelines also 
specify that the chair and other key posts should alternate between 
public sector officials and representatives of civil society or the 
private sector; that participating entities should choose their own 
representatives; that correspondence between the Fund and the CCM 
should be copied to all members; and that fiduciary arrangements as 
grants are implemented should include the monitoring of CCM performance 
as one of the indicators of proposal sustainability. 

[16] The Cuba meeting was convened at a larger forum on HIV/AIDS and 
sexually transmitted diseases in Latin America and the Caribbean.



[17] The Fund, established as a foundation under Swiss law, is a 
private entity in Switzerland. As such, it lacks the privileges and 
immunities granted to international organizations.

[18] This administrative services agreement also enabled the Fund to 
begin operating without having to create its own administrative and 
management structure. Members of the board recognized the expediency of 
this solution and its risks, and directed the Fund to explore 
alternatives.

[19] The Fund has discussed with the Swiss government the possibility 
of receiving the benefits of quasi-intergovernmental status, such as 
certain tax benefits, and is also discussing the possibility of gaining 
a more enhanced package of privileges and immunities comparable to 
those given to international organizations. Private organizations that 
have received such privileges and immunities from the Swiss government 
include the International Federation of Red Cross and Red Crescent 
Societies.



[20] Most grants last for 5 years.

[21] In September 2000, world leaders at the U.N. Millennium Summit 
agreed to a set of time-bound, measurable goals for combating poverty, 
hunger, disease, illiteracy, environmental degradation, and 
discrimination against women. 

[22] Representatives from one LFA, however, stated that it was their 
understanding that the principal recipient, along with the CCM, chooses 
the LFA in each country. According to Fund documents, the Fund makes 
this decision, taking into consideration input from the CCM. 

[23] These officials said that they expect to disburse about $750 
million in 2003 but cautioned that this figure is not certain. 

[24] The term "health products," as defined by the Fund in the grant 
agreement, includes pharmaceutical products; diagnostic technologies 
and supplies (e.g., HIV test kits); bed nets; insecticides; aerial 
sprays against mosquitoes; other products for prevention (e.g., 
condoms); and laboratory equipment and supportive products (e.g., 
microscopes and reagents). 

[25] Data on anticipated expenditures for drugs are not available for 
first-round proposals.

[26] The Fund has not provided a breakdown of anticipated expenditures 
for the full life of grants approved in the first round.

[27] The Fund cautions that the actual number of patients treated may 
vary depending on prices, recipients' ability to procure and deliver 
the drugs, and other factors related to the implementation of the 
grants.

[28] As of April 1, 2003, the World Trade Organization has not been 
able to resolve a dispute concerning a clarification of its Trade 
Related Intellectual Property Agreement that would allow the 
importation of generic drugs under patent by developing countries that 
do not have the capacity to manufacture them domestically. The dispute 
concerns which drugs, diseases, and countries will be covered. The 
United States has pushed for limited coverage, whereas other countries 
favor broader coverage. The World Trade Organization was established in 
1995 to administer rules for international trade and provide a forum 
for resolving trade disputes and conducting trade negotiations. Based 
in Geneva, Switzerland, it is composed of 145 member states.

[29] While USAID generally does not finance customs duties associated 
with procurement of imported items, it will finance duties under 
certain circumstances. For example, it will finance duties for NGOs 
that do not have tax exempt status.

[30] Pledges to the Fund may be multiyear, and thus some pledged money 
may not be contributed to the trustee in the same year the pledge was 
made. 

[31] The Board originally granted up to $613 million over 2 years to 58 
proposals. Three of these proposals have since been dropped due to 
their inability to address a follow-up request by the Fund. The maximum 
approved by the Board is thus $608 million for round 1. 

[32] The board approves grant proposals based on budgets submitted, but 
recipients are not guaranteed this amount. The amount approved is a 
ceiling, and the Fund may slightly decrease the grant amount on closer 
inspection of the recipient's needs.

[33] This resource needs estimate is reduced from an earlier one made 
at the October 2002 board meeting, which called for three proposal 
rounds in 2003 (rather than the currently planned two rounds), and 
projected a need of $7.9 billion through 2004.

[34] In addition to seeking direct monetary contributions, the Fund is 
also trying to encourage in-kind contributions, such as equipment or 
drugs, as well as skills and services, directly to recipients. While 
some in-kind donations have been made at the country level, the Fund 
itself cannot accept them directly at a global level since it is only a 
financing mechanism. 

[35] Members of the Organization for Economic Cooperation and 
Development's (OECD) Development Assistance Committee are ineligible. 
These countries are Australia, Austria, Belgium, Canada, Denmark, 
Finland, France, Germany, Greece, Ireland, Italy, Japan, Luxembourg, 
Netherlands, New Zealand, Norway, Portugal, Spain, Sweden, Switzerland, 
the United Kingdom, the United States, and the Commission of the 
European Communities.



[36] Previously, only high-income countries included in the OECD's 
Development Assistance Committee were excluded. See footnote 35 for 
membership. Country income categories are based on World Bank 
documents.

[37] According to Fund documents, disease-related need encompasses both 
current and potential burden of disease.

[38] The capacity to absorb new aid hinges on a country's ability to 
effectively combine its domestic resources, such as labor and 
managerial capacity, with the additional foreign assistance. 

[39] The United States, Canada, Japan, France, Germany, Italy, and the 
United Kingdom.



[40] See footnote 35 for Development Assistance Committee membership.

[41] Grant Agreement, Article 9: "In accordance with the criteria 
governing the selection and award of this Grant, the Global Fund has 
awarded the Grant to the Principal Recipient on the condition that the 
Grant is in addition to the normal and expected resources that the Host 
Country usually receives or budgets from external or domestic sources. 
In the event such other resources are reduced to an extent that it 
appears, in the sole judgment of the Global Fund, that the Grant is 
being used to substitute for such other resources, the Global Fund may 
terminate this Agreement in whole or in part under Article 21 of this 
Agreement." 

[42] In this report, "absorptive capacity" refers to the ability of a 
country to effectively use development assistance. Absorptive capacity 
is affected by resource constraints at various levels, including 
institutional capacity within the health sector and the capacity of the 
larger economy to absorb an influx of foreign exchange.



[43] Increases in grant assistance contribute to a rising domestic 
money supply as the government exchanges the hard currency grant 
assistance for local currency at the central bank. The resulting rise 
in the domestic money supply increases aggregate demand, contributing 
to higher inflation if the economy is at or near its short-run 
productive capacity. The increase in foreign exchange is also likely to 
lead to an appreciation of the real exchange rate under a fixed 
exchange rate regime, which is common in poor countries. Under a fixed 
system, maintenance of the nominal rate in the presence of inflation 
results in real currency appreciation. Real currency appreciation 
increases a country's export prices, rendering it less competitive 
internationally, reducing its export earnings and weakening its trade 
balance.

[44] On March 14, 2002, President Bush announced that the United States 
planned to increase its core assistance to developing countries by 50 
percent over the next 3 years, resulting in a $5 billion annual 
increase over current levels by fiscal year 2006. The Millennium 
Challenge Account will receive the increased aid to fund initiatives to 
improve the economies and standards of living in qualified developing 
countries. The President submitted his plan for the Millennium 
Challenge Account to Congress in February 2003.

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