United States Government Accountability Office

GAO Report to Congressional Committees

GLOBAL HEALTH

Global Fund to Fight 

AIDS, TB and Malaria 

Has Improved Its 

Documentation of 

Funding Decisions but 

Needs Standardized 

Oversight 

Expectations and 

Assessments 

May 2007 

 

GAO-07-627 
What GAO Found

United States Government Accountability Office

Why GAO Did This Study

Highlights

Accountability Integrity Reliability

May 2007

GLOBAL HEALTH

Global Fund to Fight AIDS, TB and 

Malaria Has Improved Its Documentation 

of Funding Decisions but Needs 

Standardized Oversight Expectations and 

Assessments 

Highlights of GAO-07-627, a report to 

congressional committees 

The Global Fund to Fight AIDS, 

Tuberculosis and Malaria has 

approved about $7 billion in grants 

to developing countries; the U.S.

has contributed $1.9 billion. The 

State Department’s Office of the 

Global AIDS Coordinator (OGAC)

coordinates the U.S. government’s 

overseas AIDS programs, with 

participation from the Department 

of Health and Human Services 

(HHS) and the U.S. Agency for

International Development

(USAID). In 2003, Congress

directed GAO to report on the 

Global Fund every 2 years. This

report assesses the Global Fund’s

(1) documentation of information 

used to support performance-based

funding decisions, (2) progress in 

implementing a risk assessment 

model and early warning system, 

and (3) oversight of the 

performance of “local fund agents” 

(LFAs), which monitor grant 

progress in recipient countries. 

GAO reviewed the documentation 

for funding decisions and 

interviewed key officials. 

What GAO Recommends

We recommend that the Secretaries

of State and Health and Human 

Services work with the Global 

Fund’s Board Chair and Executive 

Director to (1) establish 

standardized expectations for LFA 

performance and (2) require 

systematic assessments of LFA 

performance and the collection and 

analysis of performance data. The 

Departments of State and HHS, 

USAID, and the Global Fund agreed

with our findings and 

recommendations. 

Since our 2005 review, the Global Fund has improved its documentation for 

decisions to disburse funds and renew grants. The Global Fund now requires 

that fund portfolio managers more consistently document factors, such as 

grant ratings and contextual information that support disbursement and 

grant renewal decisions. Our current review of 80 grant disbursements and 

45 grant renewal decisions confirmed that Global Fund grant files 

consistently contained explanations of the information used in its funding 

decisions. For example, all grant disbursement files in our sample contained 

a written narrative explaining the ratings that portfolio managers gave the 

grants, based in part on reports completed by grant recipients. Although we 

noted that many of the grant recipients’ reports lacked some information 

needed for disbursement and renewal decisions, Global Fund officials said 

that portfolio managers obtain this information informally from the 

recipients or other stakeholders. 

The Global Fund did not implement the risk assessment model that it was 

developing at the time of our 2005 report, because it determined that the 

model did not accurately identify grant risk. To identify risks that may affect 

grant implementation, the organization currently relies on elements of its 

structures and processes, including its initial technical review, disbursement 

decision-making form, periodic grant ratings, oversight by country 

stakeholders, information from technical partners, and LFA oversight. 

Recognizing the need for a more comprehensive approach to risk

management, the Global Fund has begun developing a risk assessment 

framework for the organization that includes an early alert and response 

system to address poorly performing grants. 

The Global Fund has limited access to the information it needs to manage 

and oversee LFAs because it does not require systematic assessments of 

LFAs’ performance. As a result, the Global Fund has limited ability to 

determine the quality of LFAs’ monitoring and reporting and to identify 

situations in which more oversight of LFAs’ performance may be required. 

Previously, the Global Fund introduced a tool to assess LFA performance 

more systematically; however, this effort was unsuccessful, because use of 

the tool was not mandatory. Numerous sources raise concerns about the 

quality of grant monitoring and reporting provided by LFAs, particularly 

their ability to assess and verify recipients’ procurement capacity and 

program implementation. 

www.gao.gov/cgi-bin/getrpt?GAO-07-627.

To view the full product, including the scope 

and methodology, click on the link above. 

For more information, contact David Gootnick 

at (202) 512-3149 (gootnickd@gao.gov). 
Contents 

Letter 1

Results in Brief 3 

Background 5

Global Fund Has Improved Documentation of Its Basis for Funding 

Decisions 14

Global Fund Did Not Implement Earlier Risk Model but Is 

Developing Comprehensive Risk Framework That Includes 

Early Alert and Response System 19 

Global Fund Has Limited Ability to Manage and Oversee Local

Fund Agents’ Performance 22 

Conclusions 27

Recommendations for Executive Action 28 

Agency Comments 28 

Appendix I Objectives, Scope, and Methodology 30 

Appendix II Other Sources Cited 36 

Appendix III Comments from the Global Fund 37 

Appendix IV Comments from Departments of State and Health 

and Human Services and U.S. Agency for 

International Development 40 

Appendix V GAO Contact and Staff Acknowledgments 44

Table 

Table 1: Key Source Documents for Disbursement and Grant

Renewal Decisions 13 

Page i GAO-07-627 Global Health
Figures 

Figure 1: Global Fund Allocations between 2002 and 2006 by

Geographical Region and Disease 7 

Figure 2: Global Fund Allocations by Disease and Intervention 

Category 8

Figure 3: Performance-based Funding Oversight by Global Fund 

Secretariat, Grant Recipients, and LFAs 9 

Figure 4: Global Fund Disbursement Decision Process 12 

Figure 5: Key Elements of the Global Fund’s Phase 2 Grant 

Renewal Process 13 

Abbreviations

CCM country coordinating mechanism 

HHS Department of Health and Human Services 

HIV/AIDS human immunodeficiency virus/acquired immune 

 deficiency syndrome 

LFA local fund agent

OGAC Office of the U.S. Global AIDS Coordinator 

TB tuberculosis 

UNAIDS Joint United Nations Programme on HIV/AIDS 

USAID United States Agency for International Development 

WHO World Health Organization 

This is a work of the U.S. government and is not subject to copyright protection in the 

United States. It may be reproduced and distributed in its entirety without further 

permission from GAO. However, because this work may contain copyrighted images or 

other material, permission from the copyright holder may be necessary if you wish to 

reproduce this material separately. 

Page ii GAO-07-627 Global Health
United States Government Accountability Office

Washington, DC 20548 

May 7, 2007

The Honorable Joseph R. Biden, Jr. 

Chairman 

The Honorable Richard G. Lugar 

Ranking Minority Member 

Committee on Foreign Relations 

United States Senate 

The Honorable Tom Lantos 

Chairman 

The Honorable Ileana Ros-Lehtinen

Ranking Minority Member 

Committee on Foreign Affairs 

House of Representatives 

The Global Fund to Fight AIDS, Tuberculosis and Malaria (the Global 

Fund) was created to help finance the fight against three infectious 

diseases that kill more than 6 million people each year. Established in 

2002, the Global Fund is a private foundation intended as a partnership 

among governments, civil society, the private sector, and affected 

communities. From 2002 through February 2007, the Global Fund 

approved grant proposals totaling about $7 billion to governmental and 

nongovernmental entities to carry out disease intervention activities in 

more than 100 countries. During this period, the U.S. government 

contributed $1.9 billion—the largest amount provided to the Global Fund

by a single donor. The State Department’s Office of the Global AIDS 

Coordinator (OGAC) coordinates the U.S. government’s overseas AIDS 

programs, with participation from the Department of Health and Human 

Services (HHS) and the U.S. Agency for International Development 

(USAID). 

The Global Fund uses a performance-based funding system designed to 

encourage financial accountability and program progress and to link its 

continued grant disbursements to achievement of these results. The Global

Fund contracts with “local fund agents” (LFA) to assess recipients’ 

capacity for grant implementation and verify recipients’ financial and

program performance data. In June 2007, it plans to issue applications for 

new contracts for LFA oversight services. 

Page 1 GAO-07-627 Global Health
In 2003, Congress directed the Comptroller General to monitor and 

evaluate projects supported by the Global Fund and to submit a report 

every 2 years.1

 In June 2005, we reported that the Global Fund’s grant 

documentation did not always show clear grounds for performance-based 

funding decisions. 2

 These decisions can include periodic disbursements as 

well as decisions to renew, suspend, or terminate grants. We further noted 

that some of the grant recipients’ self-reported performance data were of 

poor quality or incomplete. We also reported that the Global Fund was 

developing a risk assessment model and early warning system to alert its 

fund portfolio managers to the need to respond to poorly performing 

grants.3

 In addition, we noted that LFAs’ assessments of recipient 

performance contained inconsistencies and that LFAs often lacked the 

knowledge and experience needed for these assessments. In its response 

to our 2005 report, the Global Fund generally concurred with our findings 

and indicated that it was taking steps to improve its structures and 

systems. 

Following up on our 2005 review, this report assesses the Global Fund’s 

(1) documentation of the information used to support performance-based 

funding decisions, (2) progress in implementing a risk assessment model 

and early warning system, and (3) oversight of local fund agents’ 

performance. 

To address these objectives, we met with key officials from the Global 

Fund and reviewed Global Fund documents, including key source 

documents from grant files. To assess the documentation of the 

information used to support performance-based funding decisions, we 

analyzed two separate random samples of grant decisions from the Global 

 1

United States Leadership Against HIV/AIDS, Tuberculosis, and Malaria Act of 2003, Pub. L. 

No. 108-25, § 202 (f), 117 Stat. 711, 727 (codified at 22 U.S.C. § 7622). 

2

The June 2005 report on the Global Fund was our first review in response to the mandate. 

See GAO, Global Health: The Global Fund to Fight AIDS, TB and Malaria Is Responding

to Challenges but Needs Better Information and Documentation for Performance-based

Funding, GAO-05-639 (Washington, D.C.: June 2005). We also completed a report in 2003

on the Global Fund at the request of the Chairman, Committee on Appropriations, 

Subcommittee on Foreign Operations, Export Financing, and Related Programs. See GAO,

Global Health: Global Fund to Fight AIDS, TB and Malaria Has Advanced in Key Areas,

but Difficult Challenges Remain, GAO-03-601 (Washington, D.C.: May 2003). This report is

our final response to the 2003 mandate. 

3

Risks faced by Global Fund grants include problems associated with operating in 

countries with varying levels of economic development and capacity, which can affect 

grant effectiveness. 

Page 2 GAO-07-627 Global Health
Fund. The first sample consisted of 80 grants that were assessed for 

performance-based funding disbursements between January 1 and 

October 1, 2006. The second sample consisted of 45 grants that were 

assessed for phase 2 grant renewal.4

 We projected our findings to the files 

of all grants that received a disbursement or were assessed for grant 

renewal during that period. To assess Global Fund progress in 

implementing a risk assessment model and early warning system, we 

reviewed international standards on risk management,5

 met with Global 

Fund secretariat officials, and reviewed Global Fund documents. We also

held discussions with the Global Fund’s Inspector General and three of its 

key technical partners.6

 To assess the Global Fund’s oversight and 

measurement of LFAs’ capacity and performance, we met with each of the 

six LFA headquarters offices and relevant secretariat personnel. In 

addition, we held structured interviews with LFA teams in 12 countries via 

telephone. We also obtained perspectives on the progress of the Global 

Fund from its partners and outside experts. We conducted our work 

between May 2006 and March 2007 in accordance with generally accepted 

government auditing standards. (See app. I for a detailed description of 

our scope and methodology.) 

The Global Fund has improved its documentation of information that 

supports its performance-based funding decisions for disbursements and 

grant renewals. Since our 2005 review, the Global Fund has updated its 

documentation system to require that portfolio managers more 

consistently document factors, such as grant ratings and contextual 

information, on which they base their decision to continue funding a 

Results in Brief 

 4

The Global Fund’s Board approves grant proposals covering up to a 5-year period and 

initially commits grants for the first 2-year phase of the proposal period. Continued grant

funding for phase 2 is conditioned on program performance, based on a review of 

performance reports and other information taken 20 months after the grant program’s start

date. 

5

See Committee of Sponsoring Organizations of the Treadway Commission, Enterprise

Risk Management —Integrated Framework Executive Summary: 2004. 

6

As a financing entity, the Global Fund relies on partners to provide technical support to

grant recipients. Its key partners include UNAIDS, OGAC, the World Bank, and the World 

Health Organization (WHO). 

Page 3 GAO-07-627 Global Health
grant.7

 Our review of 80 grant disbursements and 45 phase 2 grant renewal 

decisions confirmed that Global Fund grant files consistently contained 

explanations of the information used to make its funding decisions.8

 For 

example, 100 percent9

 of the disbursement and phase 2 files in our samples 

contained narratives explaining the manager’s rating of the grant’s 

performance. We noted that many reports completed by grant recipients 

lacked explanations either for not meeting or for exceeding the grant’s 

targets. However, Global Fund officials said that fund portfolio managers 

obtain the needed information informally from the recipients or other 

stakeholders. 

The Global Fund did not implement the risk assessment model that it was

developing at the time of our 2005 report, because it determined that the 

model did not accurately identify grant risk. To identify risks that may 

affect grant implementation, the organization currently relies on elements 

of its structures and processes, including its initial technical review, 

disbursement decision-making form, periodic grant ratings, oversight by

country stakeholders, information from technical partners, and LFA 

oversight. Recognizing the need for a more comprehensive approach to 

risk management the Global Fund has begun developing a risk assessment 

framework for the organization that includes an early alert and response 

system to address poorly performing grants. 

Because it does not require systematic assessments of LFAs’ performance, 

the Global Fund has limited access to the information it needs to manage 

and oversee LFAs.10 Global Fund portfolio managers set expectations for 

 7

According to the Global Fund’s disbursement decision-making form, contextual 

information critical to disbursement decisions includes qualitative factors relating to 

governance, grant management, and external factors. This form, together with the principal 

recipient’s report on the achievement of all individual targets and the LFA’s verification is 

the documented basis for funding decisions during implementation. 

8

The Global Fund maintains a file for each grant that contains, among other things, all 

reports relating to that grant’s performance, funding requests, and disbursement and phase 

2 assessments and funding decisions. 

9

For both samples the estimate was 100 percent. For each of these estimates we are 95

percent confident that at least 94 percent of all files in our population contain narratives

explaining the manager’s rating of the grant’s performance. 

10Good practice suggests that organizations should monitor their contractors’ performance

during the course of interaction and periodically evaluate performance based on clear

expectations. Assessment results should include consistent patterns of rewards, penalties, 

or both. (See app. II for sources of these criteria.) 

Page 4 GAO-07-627 Global Health
LFA performance informally and individually, often resulting in, for 

example, variances in scopes of work and definitions of satisfactory 

performance. Moreover, the Global Fund does not require systematic 

assessment or reporting of LFAs’ performance; instead, managers provide

feedback to LFAs informally. Because of the lack of systematic 

assessment, the Global Fund has limited ability to determine the quality of

grant services provided by LFAs and to identify situations in which more 

oversight of LFAs by the Global Fund may be required. The Global Fund 

previously introduced a tool to assess LFA performance more 

systematically. However, this effort was unsuccessful because use of the 

tool was not mandatory. Numerous sources raise concerns about the 

quality of grant oversight provided by LFAs, particularly their ability to 

assess and verify recipients’ procurement capacity and program 

implementation. 

To improve the Global Fund’s ability to oversee the performance of its 

local fund agents, we recommend that the Secretaries of State and HHS 

work with the Global Fund’s Board Chair and Executive Director to (1) 

establish standardized expectations for LFA performance; and (2) require 

systematic assessments of LFA performance and the collection and 

analysis of performance data. 

In responding to our draft report, the Departments of State and Health and

Human Services, the U.S. Agency for International Development, and the

Global Fund agreed with the report’s findings, conclusions, and 

recommendations. (See apps. III and IV for their comments.) 

The Global Fund, a private foundation in Switzerland, was established in 

2002 as a funding mechanism to collect public and private contributions to 

finance grants for the prevention and treatment of HIV/AIDS, tuberculosis

(TB), and malaria.11 About 96 percent of the contributions to the Global 

Fund since its inception have come from governments. Private sector 

support increased in 2006, notably owing to a pledge of $500 million by the 

Background 

 11UNAIDS and WHO estimate that 39.5 million people were living with HIV in 2006 and that

2.9 million people died of AIDS-related illnesses in 2006. WHO estimates that malaria kills 

more than 1 million people per year and that 124 million people in Africa live in areas that 

are at risk for seasonal malaria epidemics. WHO also estimates that 1.7 million people die 

of TB each year. 

Page 5 GAO-07-627 Global Health
Bill and Melinda Gates Foundation and receipt of almost $19 million 

through the (RED)TM initiative.12

By December 2006, the Global Fund had completed six proposal rounds, 

approved about $7 billion in grants, signed grant agreements worth over $5 

billion and disbursed more than $3 billion to grant recipients in 132 

countries. The Global Fund also reports that by December 2006, its grants

enabled recipients to supply antiretroviral drugs to 770,000 people infected 

with HIV/AIDS, treat 2 million people infected with tuberculosis, and 

distribute 18 million insecticide-treated nets to combat malaria. 

Global Fund Portfolio 

Distribution 

The Global Fund’s underlying principles require, among other things, that

it maintain a balanced grant portfolio in terms of region, disease, and type

of intervention; operate transparently and accountably; and use a simple, 

rapid, and innovative grant-making process.13 As figure 1 shows, between 

2002 and 2006, the Global Fund distributed 55 percent of grant funds to 

sub-Saharan Africa, with the remainder of the funding divided among 

other regions of the world. Also during this time period, the Global Fund

distributed 57 percent, 15 percent, and 27 percent of grant funds, 

respectively, for HIV/AIDS, tuberculosis, and malaria programs. The 

remaining 1 percent funded projects to strengthen health systems. 

 12(RED)TM is a private sector initiative to provide financing for Global Fund HIV/AIDS 

projects in Africa. Companies participating in the initiative donate a portion of profits from

the sale of (RED) branded items.

13The Global Fund’s key principles are to (1) operate as a financial instrument, not an

implementing entity; (2) make available and leverage additional resources; (3) support

programs that evolve from national plans and priorities; (4) operate in a balanced manner

with respect to geographic regions, diseases, and healthcare interventions; (5) pursue an

integrated and balanced approach to prevention, treatment, care, and support; (6) evaluate

proposals through an independent review process; and (7) operate in a transparent and

accountable manner and employ a simplified, rapid, and innovative grant-making process.

Page 6 GAO-07-627 Global Health
Figure 1: Global Fund Allocations between 2002 and 2006 by Geographical Region and Disease 

9%

11%

11%

14%

55%

15%

27%

57%

Geographical region Disease

Source: GAO analysis of Global Fund data.

South Asia,

Middle East and

North Africa

Eastern Europe and

Central Asia

Latin America and

the Caribbean

East Asia and

the Pacific

Sub-Saharan Africa

TB

Malaria

HIV/AIDS

1% 

Health system

strengthening

In 2005, the Global Fund began tracking the allocation of grant funds in 

grant proposals according to the disease intervention categories of 

prevention, care, and treatment. Figure 2 shows the Global Fund’s 

estimated distribution by disease and intervention category.

Page 7 GAO-07-627 Global Health
Figure 2: Global Fund Allocations by Disease and Intervention Category 

HIV/AIDS ($315 million)

Source: GAO based on Global Fund Round 5 data from 2006.

30%

Prevention

14%

Care and

support

24%

Othera

32%

Treatment

Malaria ($202 million)

35%

Prevention

40%

Treatment

25% 

Otherc

Tuberculosis ($223 million)

54%

Otherb

15%

Prevention

25%

Treatment

6%

Care and support

(including TB/HIV 

collaborative

activities)

a

For HIV/AIDS, “Other” includes grants for health system strengthening, monitoring and evaluation, 

supportive environment, HIV/TB collaborative activities, and other activities. 

b

For tuberculosis, “Other” includes grants for health system strengthening, monitoring and evaluation, 

supportive environment, and other activities. 

c

For malaria, “Other” includes grants for health system strengthening, supportive environment, and 

other activities. 

Key Elements of the 

Global Fund’s Structure 

The Global Fund’s principles also require it to focus on performance by 

linking its resources to the achievement of clear, measurable, and 

sustainable results. To achieve this focus on performance-based funding,

the Global Fund relies primarily on oversight by, and interaction among, 

Global Fund secretariat personnel,14 grant recipients, and LFAs. 

(See fig. 3.) 

 14Between 2003 and 2006 the Global Fund secretariat staff increased from 63 to 240 

employees. 

Page 8 GAO-07-627 Global Health
Figure 3: Performance-based Funding Oversight by Global Fund Secretariat, Grant 

Recipients, and LFAs

Sources: GAO (data); Map Resources (clip art).

External 

specialists

Global 

Fund

Local fund agents

Fund portfiolo

managers

Local fund agents

(LFA) manager

Contracts

department

LFA central

teams

LFA country teams

Grant recipients informal relationship

a

Fund portfolio managers also have formal relationships with grant recipients and they interact with all 

stakeholders including LFA central teams 

• Global Fund secretariat personnel. Within the secretariat, the fund 

portfolio managers are primarily responsible for reviewing grant progress 

and making performance-based funding recommendations. Other 

secretariat personnel are consulted during key stages in the grant life 

cycle. Fund portfolio managers interact with the LFA country teams 

providing oversight services for their grant, as well as with principal 

recipients, subrecipients, technical partners, and other stakeholders in the 

recipient countries. In addition to the country teams, staff from the 

contracts department and the Global Fund’s LFA manager interact with 

LFA headquarters teams, known as the central teams, regarding 

Page 9 GAO-07-627 Global Health
contracting and administrative matters and any problems related to LFA 

country teams. 

• Grant recipients. At the country level, the principal grant recipient is 

responsible for receiving and implementing the grant.15 During 

implementation, the principal recipient is responsible for monitoring and 

evaluating the grant’s effectiveness in accordance with grant objectives 

and making sure that funds are properly accounted for. The principal 

recipient is also responsible for overseeing the activities of any 

subrecipients implementing grant activities. 

• Local fund agents. The Global Fund currently contracts with LFA 

headquarters central teams at six organizations16 to oversee grants in 120

countries and multicountry programs.17 In the majority of cases, the central

team establishes interfirm agreements with its affiliated offices within 

each country to perform LFA services.18 The LFA assesses recipient 

capacity prior to grant signing and performs verification and oversight 

duties throughout the life of the grant. The LFA central teams typically

contract with external specialists for work outside the expertise of their 

organization, especially during the initial assessments of recipient 

capacity. For example, during the initial assessments, some organizations 

contract with a procurement expert to review recipients’ capacity for 

 15Government agencies are the principal recipients of 64 percent of grant funds. Nonprofit 

development organizations and multilateral organizations also act as principal recipients. 

In many cases the principal recipient further distributes the funds to multiple subrecipients

to implement grant activities. 

16As of 2007, the Global Fund had contracted with the following organizations to perform 

LFA oversight duties: PricewaterhouseCoopers, KPMG, Emerging Markets Group, Crown 

Agents, the Swiss Tropical Institute, and the United Nations Office for Project Services. 

PriceWaterhouseCoopers and KPMG together account for LFA services in 97 of 120

countries and regional programs. 

17In addition to 113 country programs, LFAs oversee grants in 1 multicountry program in

Africa 5 multicountry programs in Latin America and the Caribbean, and 1 multicountry 

program in the Western Pacific. 

18The specific responsibilities delegated to the LFA central team, LFA country team, and 

outside experts sometimes vary from one LFA organization to another. For example, of the

two firms with the largest portfolios, one uses a decentralized approach in which the

majority of the work occurs within the country team, and the other uses a centralized 

approach in which the country teams perform the oversight tasks, but all LFA products are 

vetted through the central team before reaching the secretariat. Using a different approach, 

one of the smaller LFA organizations has very limited presence within the recipient 

countries; instead, it sends specialists into the country to perform oversight activities as 

needed. 

Page 10 GAO-07-627 Global Health
procurement and supply chain management. The Global Fund budgeted

approximately $22 million—26 percent of the secretariat’s operating 

budget—to support the LFA structure for 2006 and spent about an 

additional $320,000 on LFA-related functions, including personnel costs 

related to LFA management, studies of the LFA model, and travel to meet

with LFAs. 

The Global Fund’s performance-based funding process involves an initial 

assessment of recipients’ capacity to manage and implement grants, 

periodic disbursement decisions based largely on reports by the grant 

recipient and the LFA, and a phase 2 grant renewal review after about 2 

years. 

Performance-Based 

Funding Process 

• Assessment of grant recipients’ capacity. Prior to funding a grant, the 

Global Fund considers, among other things, a grant recipient’s ability to 

(1) manage, evaluate, and report on grant-funded activities; (2) manage 

and account for funds; and (3) procure goods and services. LFAs assess 

prospective recipients’ capacity to perform these activities. Funding is 

conditioned on recipients’ meeting performance targets mutually agreed 

with Global Fund technical experts. 

• Periodic disbursements. After the initial screening and approval process, 

the grant recipient must produce quarterly or semi-annual reports 

describing financial and program progress as well as a funding request for 

the next disbursement period. The grant recipient sends these reports to 

the LFA, which prepares a report verifying the accuracy of the 

information, identifying potential grant problems, rating grant

performance, and recommending a disbursement amount. The LFA then 

forwards the grant recipient’s report and its own report to the designated 

Global Fund portfolio manager. The fund portfolio manager compares the 

financial information and data on program progress with the grant’s 

performance targets, taking into account information such as the status of 

procurements and political or economic constraints. The fund portfolio 

manager’s team leader makes a funding decision if the disbursement is 

less than $2 million.19 Figure 4 illustrates the Global Fund’s periodic 

disbursement decision process. 

 19A disbursement greater than $2 million requires a decision by the secretariat’s Director of

Operations. 

Page 11 GAO-07-627 Global Health
Figure 4: Global Fund Disbursement Decision Process 

S M TWT F S S MTWT F S S MTWT F S

Sources: GAO (data); Map Resources (clip art).

LFAs

Fund

portfolio

managers’/Team

leaders’

disbursement

decision Report to secretariat

• Verifies information

• Recommends

amount disbursed

Quarterly or 

semiannual 

reports and 

funding 

request

Grant

recipients

• Grant renewal process. A key milestone in the performance-based funding 

approach is the phase 2 grant renewal review—a detailed analysis of grant 

progress at about 2 years, required to continue funding for up to the next 3 

years. Similar to its process for disbursement decisions, the Global Fund’s

grant renewal process requires grant recipients to send documentation of 

financial and program progress to the LFA, which verifies the information 

and analyzes the phase 2 proposal. In a report to the Global Fund, the LFA 

identifies potential grant problems, rates the performance of the grant, and 

recommends the amount needed to fund up to the next 3 years of the 

grant. Because phase 2 is the decision point for continuing the grant to its 

5-year completion, the process also includes an extensive and detailed

review of cumulative information by fund portfolio managers, their 

supervisors, and evaluation and finance staff. The phase 2 renewal process 

culminates in a panel discussion and final recommendation to the board. 

Figure 5 illustrates key elements of the Global Fund’s phase 2 grant 

renewal process. 

Page 12 GAO-07-627 Global Health
Figure 5: Key Elements of the Global Fund’s Phase 2 Grant Renewal Process 

Application

for

phase 2

S M TWT F S S MTWT F

S

S MTWT F

S

Further 

Global 

Fund

review

Cumulative information from:

• Fund portfolio managers

• Supervisors

• Evaluation and finance staff

Sources: GAO (data); Map Resources (clip art).

LFAs Fund

portfolio

manager

Secretariat

staff

panel 

discussion

Final

recommendation 

to the board

Detailed 

report to 

Secretariat

Quarterly or 

semiannual 

reports and 

funding 

request

Grant

recipients

CCMs

Table 1 outlines the key source documents related to disbursement 

decisions and phase 2 grant renewals from electronic “grant files” that we 

reviewed in conducting this study. 

Table 1: Key Source Documents for Disbursement and Grant Renewal Decisions

Funding

decision Reporting form Completed by

Disbursement 

Progress Update and Disbursement 

Request 

Grant recipient

LFA Progress Review and 

Recommendation 

LFA 

Disbursement Decision-Making

Form 

Global Fund secretariat 

Page 13 GAO-07-627 Global Health
Funding

decision Reporting form Completed by

Phase 2 renewal 

Request for Continued Funding Country coordinating 

mechanism (CCM)20

Grant Performance Report Global Fund secretariat 

Phase 2 Request Assessment 

Report 

LFA 

Grant Scorecard Global Fund secretariat 

Source: GAO analysis based on Global Fund documentation. 

In preparation for its retender of LFA contracts worldwide in mid to late 

2007, the secretariat will continue discussions on the key principles that 

will potentially shape the design of the next LFA model. According to a 

Global Fund official, they will take into consideration findings from this 

review and two internal Global Fund studies. They expect to issue the 

request for applications in late June. 

The Global Fund has improved its documentation of information 

supporting its performance-based funding decisions. For example, the 

Global Fund’s system now requires that portfolio managers consistently 

document factors that may affect the decision to continue funding a grant,

especially when the grant falls short of its performance targets. In 

addition, the Global Fund grant files that we reviewed consistently 

contained explanations of funding decisions and contextual data 

informing the decisions. Although we found many reports submitted by 

grant recipients to the Global Fund do not provide explanations for all 

unmet grant performance targets, according to Global Fund officials, fund

portfolio managers are able to obtain the needed information directly from

the grant recipients or other stakeholders. 

Global Fund Has 

Improved 

Documentation of Its 

Basis for Funding 

Decisions 

 20Country coordinating mechanisms are the entities that formally submit the Request for

Continued Funding. In their capacity as the national authority that oversees grant 

implementation, CCMs include representatives from both the public and private sectors, 

including governments; multilateral or bilateral agencies; non-governmental organizations; 

academic institutions; private businesses; and people living with the diseases. For each

grant, the CCM nominates one or a few public or private organizations to serve as grant

recipient. 

Page 14 GAO-07-627 Global Health
The Global Fund has developed a more systematic process for 

documenting the basis for its funding decisions. In June 2005, we noted 

that the Global Fund did not consistently document the reasons for its 

determinations that recipients’ performance warranted additional funding

for periodic disbursements or its recommendations regarding grant 

renewals. We recommended that the Global Fund continue efforts to 

clearly document the Global Fund’s reasons for periodically disbursing 

funds and renewing grant agreements. Subsequently, to increase the 

transparency of its performance-based funding system, the organization 

made several changes to its documentation process. 

Global Fund Has Improved 

Its Processes for 

Documenting the Basis for 

Funding Decisions 

In late 2005, the Global Fund developed a disbursement decision-making 

form to ensure that fund portfolio managers consistently show the basis 

for each disbursement decision. The form requires, among other things, 

• an explanation of the performance rating assigned to the grant, addressing 

any discrepancy between ratings by the fund portfolio manager and the 

LFA and verifying that the manager has considered any problems raised by 

the LFA regarding data quality and reporting, program progress, and 

expenditures;21 and 

• contextual information critical to the disbursement decision, such as 

information demonstrating governance problems, grant management 

weaknesses, currency fluctuations, or natural disasters in the country or 

region where a funded project is being implemented. 

The Global Fund also revised other forms to provide more systematic 

reporting of grant program progress. These revisions included 

improvements to the grant progress update and disbursement request, the 

LFA progress review and recommendation report, and the phase 2 grant 

scorecard.22 For example, the updated progress update form contains a 

new requirement that LFAs comment on the reliability of grant recipient

data on target achievement. The updated grant scorecard includes 

requests for data showing the timeliness and effectiveness of grant 

recipients’ use of the funds during phase 1 of grant implementation. It also

 21Fund portfolio managers, with recommendations from LFAs, give performance ratings

that range from A (expected or exceeding expectations), B1 (substantial achievements 

made), B2 (little progress made), C (unacceptable). 

22In preparation for the phase 2 grant renewal decision, Global Fund staff prepare a

summary of information from the grant recipient, LFA, portfolio manager, performance

evaluation team, and secretariat financial staff on grant performance. 

Page 15 GAO-07-627 Global Health
includes a new section where the secretariat can record plans to 

materially change the grant in phase 2—for example, adding or dropping 

goals or objectives because of lessons learned during phase 1.23

According to Global Fund officials, the changes to their system of 

recording information about grant performance and problems have made 

the decision process more systematic and transparent. For example, 

Global Fund officials, including some fund portfolio managers, said the 

new disbursement decision-making form provides managers a place to 

systematically explain their ratings. Officials from OGAC and the World 

Bank with whom we met said that the Global Fund’s more consistent 

documentation of the basis of its decisions has made the decisions easier 

to understand. 

Our review of random samples of disbursement and phase 2 grant files 

indicated that most files systematically explain a number of key factors 

used to support disbursement and grant renewal decisions.24 In our 2005 

report, we observed that the Global Fund’s grant files provided little 

explanation of disbursement decisions, including decisions to disburse 

funds to recipients who reported not meeting their targets. In addition, our 

2005 report noted that, according to Global Fund officials, many grant 

renewal decisions were not supported by the information needed to assess 

whether funding decisions were consistently based on grant performance. 

In our current review, we found that Global Fund grant files consistently 

contained explanations of ratings of grant performance that were 

important to funding decisions, even when key stakeholders’ ratings and 

recommendations did not concur. Based on our samples, 100 percent25 of 

both disbursement and phase 2 files contained narratives explaining the 

manager’s rating of the grant’s performance. Most grant files also 

contained explanations for lack of concurrence in ratings or 

Grant Files Demonstrate 

Improved Documentation 

Supporting Funding 

Decisions 

 23The Global Fund calls such changes material reprogramming. 

24All percentage estimates based on this sample provided in this report have 95 percent 

confidence intervals of within plus or minus 13 percentage points. See appendix I for more

information on our sampling methodology. 

25For both samples the estimate was 100 percent. For each of these estimates we are 95

percent confident that at least 94 percent of all files in our population contain narratives

explaining the manager’s rating of the grant’s performance. 

Page 16 GAO-07-627 Global Health
recommendations by the various officials charged with assessing grant 

performance.26 For example: 

• In all 8 cases in which fund portfolio managers’ phase 2 grant ratings 

differed from those of the evaluation staff, the scorecards in the grant files 

contained an explanation for the lack of concurrence.27

• In all 5 cases in which fund portfolio managers’ phase 2 grant renewal 

recommendations differed from those of the LFAs’, the scorecards in the 

grant files contained an explanation for the lack of concurrence. 

• In cases in which fund portfolio managers’ assessments of grant 

performance led them to disagree with the disbursement amount 

recommended by the LFA or the amount requested by the grant recipient,

31 of 32 of those grant files included a narrative explaining the 

discrepancy.28

According to Global Fund officials, such explanations provide valuable 

information that helps decision-makers better understand and consider 

grant performance. 

The Global Fund files that we reviewed also consistently explained 

contextual information and other issues that may affect the grant 

recipient’s ability to meet agreed-upon targets. We found that an estimated 

96 percent of disbursement files in which portfolio managers had specified 

contextual issues that negatively affected grant performance included 

narratives explaining each issue. According to Global Fund officials, such

 26LFAs, portfolio managers, and evaluation staff make phase 2 funding recommendations 

(Go, Conditional Go, or No Go). The Global Fund Board of Directors reviews these 

recommendations and makes the final phase 2 recommendation to renew the grant, not to

renew the grant, or to renew the grant with conditions attached. Global Fund officials said 

that differences between ratings and proposed funding levels are common and do not

necessarily indicate mistakes or poor judgment by LFAs, portfolio managers, or staff from

the evaluation team. They said, for example, that after LFAs have completed their 

assessments, LFAs and fund portfolio managers often receive new information about grant

performance that leads them to propose a different phase 2 amount than originally 

recommended by the LFA. 

27Fund portfolio managers and the evaluation staff gave the majority of the phase 2 grants 

matching ratings. They concurred on about 73 percent of their phase 2 grant renewal 

recommendations. 

28We estimated that in almost half of grant disbursement files, the fund portfolio manager

disagreed with the amount recommended by the LFA or the amount requested by the grant

recipient. 

Page 17 GAO-07-627 Global Health
information is crucial to grant disbursement and renewal decisions, 

especially if recipients have not met many of the targets set at the grant’s 

initiation. In addition, in reviewing 43 disbursement files for grants whose 

recipients had not yet met remedial requirements imposed by the Global 

Fund as conditions for grant renewal, we found that 42 (98 percent) 

contained an explanation of recipients’ progress toward meeting the 

requirements. 

Although recipients’ formal documentation of grant performance remains 

incomplete, Global Fund officials informally gather the missing 

information that they consider necessary for making and documenting the 

basis for funding decisions. In June 2005, we reported that recipient 

progress reports varied in quality and that the limited monitoring and 

evaluation capabilities of many recipients raised questions about the 

accuracy of their reporting.29 Our current analysis found that an estimated 

39 percent of phase 2 grant files contained evidence, identified by fund 

portfolio managers, of weaknesses in the reliability of the grant recipient’s 

data. In contrast to the consistent documentation we found on forms 

completed by Global Fund staff, many periodic performance reports 

completed by grant recipients lacked explanations either for not meeting 

or for exceeding the grant’s targets. In those cases, according to LFAs, 

fund portfolio managers, and other Global Fund officials, fund portfolio 

managers relied on regular phone and e-mail contact with grant recipients

or other stakeholders to obtain the missing information needed for 

performance-based funding decisions. Global Fund officials said that 

information crucial to funding decisions is documented on the 

disbursement decision-making form or phase 2 grant scorecard, even if it 

was not recorded by grant recipients or LFAs in their formally required 

reports. 

Global Fund portfolio managers said that recipients’ explanations for not 

meeting targets may influence the portfolio manager’s recommendation to 

withhold funds or, alternately, to continue to fund the grant despite 

performance problems. According to Global Fund officials and public 

health experts, improving grant recipients’ monitoring and evaluation 

capacity, as well as their ability to report accurately and completely, will 

require long-term investment on the part of the Global Fund and its 

partners. 

Global Fund Informally 

Gathers Missing Data on 

Grant Recipients’ 

Performance 

 29GAO-05-639. 

Page 18 GAO-07-627 Global Health
The Global Fund did not implement the risk assessment model that it was

developing at the time of our 2005 report, because it determined that the 

model did not accurately identify grant risk. The organization relies on 

elements of its structures and processes, including its initial technical 

review, disbursement decision-making form, periodic grant ratings, CCM 

oversight, information from technical partners, and LFA oversight, to 

identify potential risks. Recognizing the need to establish a more 

comprehensive approach to risk management, the Global Fund has begun 

developing a risk assessment framework for the organization that includes 

an early warning and response system to address poorly performing 

grants. 

The Global Fund did not implement the risk-assessment framework to 

identify poorly performing grants that it was developing at the time of our 

2005 report.30 We reported that the organization had devised a risk 

assessment model and an early warning system to identify poorly 

performing grants and more systematically alert portfolio managers when

they needed to intervene.

31 According to the Global Fund, because it 

disburses grants in countries with varying levels of economic development 

and health systems capacity, the risk model was to incorporate 

quantitative data, such as grant size and performance as well as country 

development and corruption data. Using these quantitative indicators, the

model would generate reports that indicated potential problems, and 

portfolio managers would evaluate the reports in light of contextual 

information. According to an official who participated in developing the 

framework, it was not implemented because it relied too heavily on

quantitative indicators and did not adequately account for contextual 

factors, leading to risk ratings that were too inaccurate to be useful. For 

example, according to Global Fund officials, in a test of the model, a 

particular grant was rated as low risk based on the host country’s 

development and corruption indicators. However, the grant ultimately 

failed and was not renewed at the phase 2 grant renewal review. 

Global Fund Did Not 

Implement Earlier 

Risk Model but Is 

Developing 

Comprehensive Risk 

Framework That 

Includes Early Alert 

and Response System 

Global Fund Did Not 

Implement the Grant Risk 

Assessment Model 

Described in the 2005 GAO 

Report 

 30According to international standards, risk assessment reduces operational surprises and

losses and enhances an organization’s ability to identify potential concerns and establish 

appropriate responses. See Committee of Sponsoring Organizations of the Treadway 

Commission, Enterprise Risk Management —Integrated Framework Executive 

Summary, 2004. 

31GAO-05-639. 

Page 19 GAO-07-627 Global Health
Although the Global Fund’s grant oversight incorporates several elements 

of risk management, the absence of a risk assessment model limits its 

ability to respond methodically to poorly performing grants and use 

available resources to increase oversight as needed. According to Global 

Fund officials, the organization currently relies on existing oversight 

mechanisms such as its initial technical review of grant proposals, 

standardized decision forms, periodic grant ratings, CCM oversight, 

technical partners’ assistance, and LFAs’ reviews to identify and assess 

potential mismanagement, irregularities, or other risks to successful grant 

implementation. 

Global Fund Applies 

Elements of Risk 

Management but Lack of 

Risk Assessment Model 

Limits its Ability to 

Respond to Poorly 

Performing Grants 

• Technical review. The technical review panel raises important technical 

issues that grantees must address when presenting their proposals to the 

panel. Proposals with a very high technical risk profile generally are not 

recommended for funding. 

• Disbursement decision-making form. Grant risk is mitigated by the fund

portfolio manager’s use of the standard disbursement decision-making 

form, which includes financial and program data from the recipient that 

has been verified by the LFA. 

• Rating grant progress for each disbursement request. Since 2006, 

according to Global Fund officials, every progress and disbursement 

request, after the first disbursement, has been graded on a scale of A, B1, 

B2, or C. This information is posted on the Global Fund Website’s financial

data base and included in grant performance reports that are updated on 

the Global Fund website at each disbursement. This rating system is a key 

tool for identifying grants at risk and for sharing information with 

technical partners. 

• Country coordinating mechanism (CCM). A key responsibility of the 

CCM is to continue to monitor grant progress during implementation and 

identify problems that may affect progress. In many countries, Global 

Fund technical partners such as UNAIDS, WHO, and USAID are members 

of CCMs. 

• Partner assistance. Global Fund officials rely on technical partners with 

staff based in recipient countries to provide contextual information on 

grant performance, identify risks, and help respond to problems that affect 

grant implementation. 

• LFA reviews. Global Fund officials emphasized that LFAs identify 

potential grant risks in their periodic verification of grant progress and 

Page 20 GAO-07-627 Global Health
during the cumulative review and performance assessment for the phase 2 

renewal process. 

The absence of a model to assess grant risk has limited the Global Fund’s 

ability to methodically identify poorly performing grants and use available 

resources to increase oversight as needed. According to a senior manager 

from an LFA with one of the largest grant portfolios, because the Global 

Fund has not assessed grants as high, medium, or low risk, LFA oversight 

has not differed substantially by grant risk level and LFA oversight 

resources have not been used to optimal effect. For example, although 

some grants may require more oversight because of potential misuse of 

grant money or limited recipient capacity, LFA task orders and fees are 

generally no different for potentially problematic grants than for grants 

with few expected problems. Similarly, the frequency of LFA visits to 

project sites for monitoring and data verification has not been based on a 

systematic estimate of risk. 

Global Fund officials informed us in April 2007 that they are developing a 

top-level framework for risk management that will cover all aspects of the 

organization’s strategic direction, including addressing resources and 

skills at the secretariat level, developing a model for systematically 

assessing grant risk, and fully implementing an early alert and response 

system. Global Fund officials have acknowledged the need for a 

quantitative model for ranking grants by level of risk, supplemented by 

additional qualitative factors that may change a grant’s rating or ranking,

to identify and mitigate grant risk in a timely manner. The Global Fund 

recently organized a risk seminar for directors and senior managers and 

engaged an international firm to help them achieve consensus on a shared 

approach to comprehensive risk management. We reviewed a draft outline 

of the guiding principles for developing a risk management framework 

that the Global Fund developed in February 2007. As of April 2007, the 

Global Fund is in varying stages of progress in developing and 

implementing detailed risk strategies. 

According to Global Fund officials, the secretariat has put in place the first 

components of its early alert and response system intended to identify as 

early as possible grants that are performing poorly and facing 

implementation difficulties. These first components include posting the 

grant disbursement and renewal ratings on the Global Fund Website and

efforts to engage more technical assistance from partners for poorly 

performing grants. Global Fund officials recognize that for the system to 

work effectively principal recipients, CCMs, stakeholders, and partners 

Global Fund Is Developing 

a Comprehensive 

Framework for Risk 

Management and Has 

Established First 

Components 

Page 21 GAO-07-627 Global Health
must share responsibility for tracking the progress of grant 

implementation and take appropriate action when progress is impeded. 

Global Fund officials stated that the early alert and response system will 

eventually include documenting and disseminating best practices, 

formalizing the system within the secretariat and among country-level 

stakeholders and partners, and increasing the engagement of partners in 

grant oversight. 

The Global Fund lacks the information it needs to manage and oversee the 

LFAs because of a lack of systematic assessments of LFAs’ performance. 

Good practice suggests that organizations monitor their contractors’ 

performance during the course of interaction and periodically evaluate 

performance based on clear expectations. Assessment results should 

include consistent patterns of rewards, penalties, or both. (See app. II for 

sources of these principles.) Global Fund portfolio managers set 

expectations for LFA performance informally and individually, frequently

leading to inconsistent expectations and resulting in challenges for both 

the LFAs and their managers. Moreover, the Global Fund does not require 

formal assessments or reports of LFA performance; instead, LFAs are 

assessed informally and irregularly, and assessment results are not 

systematically documented. As a result, the Global Fund has limited 

records of, and data on, LFA performance. Although the Global Fund 

made a previous attempt to assess LFAs more systematically, this effort 

was unsuccessful. According to secretariat staff, key partners, and outside

experts, LFAs’ performance and capacity vary.

Rather than establish standardized performance expectations for all LFAs, 

the Global Fund portfolio managers establish expectations informally for 

the quality of each LFA’s performance. The Global Fund’s contracts with 

LFAs, as well as the guidelines that it provides, outline the tasks that all 

LFAs must complete, such as considering a principal recipient’s 

programmatic and financial implementation progress in relation to its 

plans. The contracts also contain general statements about LFA 

performance; for example, a sample LFA contract specifies that all tasks 

should be carried out to the satisfaction of the Global Fund.32 However, 

Global Fund policy states—and secretariat staff and 11 of the 12 LFA 

Global Fund Has 

Limited Ability to 

Manage and Oversee 

Local Fund Agents’ 

Performance 

Global Fund Has Not 

Standardized Its 

Expectations for Local 

Fund Agent Performance 

 32Global Fund officials gave us a sample LFA contract and said that its contracts with the 

six LFAs were very similar. 

Page 22 GAO-07-627 Global Health
country teams that participated in our structured interview confirmed—

that the fund portfolio manager is primarily responsible for defining 

satisfactory performance for his or her designated LFAs. As of March 2007, 

the Global Fund had not provided fund portfolio managers any specific 

training or written guidance defining acceptable or good LFA 

performance, including the quality of their reporting.33

The lack of standardized performance expectations results in challenges

both for the LFAs and for Global Fund management. 

• LFA challenges. Because fund portfolio managers set expectations 

informally and individually, LFA country teams frequently encounter 

different expectations from successive portfolio managers. For example, 

among the LFA country teams who participated in our structured 

interviews, 6 of 10 teams who had interacted with more than one fund 

portfolio manager said that the managers’ criteria for a high-quality report 

had varied. According to the respondents, variations in fund portfolio 

managers’ expectations often involved differences in the scope of work 

that they expected LFAs to complete. For instance, members of one 

country team said that their previous fund portfolio manager had wanted 

the team to focus primarily on financial data in its reports, while the 

current manager wanted a focus on programmatic issues. In another 

country, one fund portfolio manager wanted the team to conduct on-site 

verification of grant subrecipients, while a subsequent manager did not 

consider site visits a priority. In the remaining four cases, country teams 

did not report substantial variation between different fund portfolio 

managers. In one of these cases, the team said that a previous manager 

established expectations that subsequent managers used in turn, therefore 

providing continuity. 

• Management challenges. The lack of standardized LFA performance 

expectations also presents challenges among those responsible for 

managing the LFAs. According to the manager of one LFA central team 

with a large grant portfolio, variations in Global Fund expectations made it 

difficult to establish best practices for its LFA country teams. Likewise, 

several Global Fund officials noted that secretariat staff have conflicting 

ideas about LFA performance criteria. In one instance, according to Global 

Fund officials, a group of fund portfolio managers were unable to agree on

 33The Global Fund secretariat began piloting training courses for fund portfolio managers

in 2006 and told us that a module on LFAs would be added to this training series in the

future. 

Page 23 GAO-07-627 Global Health
what constituted a high-quality report. Fund portfolio managers and other 

key officials observed that more standardization of expectations would be 

beneficial, although some noted that this standardization should be 

balanced to allow them to maintain flexibility to account for country 

context. 

The Global Fund does not require formal, regular assessments of LFA 

performance. As a result, it lacks LFA performance records and cannot 

systematically track performance. 

Although Global Fund officials regularly review the reports they receive 

from the LFAs and provide informal feedback to country teams, they 

assess LFA performance informally and at irregular intervals.34 All fund 

portfolio managers that we interviewed, as well as 11 of the 12 LFA 

country teams that participated in our structured interviews, said that fund 

portfolio managers interact informally and frequently with country team 

members, often orally or by e-mail. In addition, all but one country team 

said that fund portfolio managers provide informal feedback on their 

performance. For example, members of one team noted that they received

feedback from their fund portfolio manager for each report and requested 

more information as necessary. In another case, the manager provided 

feedback to the LFA central team, which passed the feedback to the 

country team. A majority of the country teams reported receiving feedback 

from their fund portfolio manager when he or she traveled to the recipient

country, at least once a year. Fund portfolio managers told us that if they 

continually encounter problems with a country team, they inform the 

Global Fund’s LFA manager, who discusses the issue with the central 

team; if this does not resolve the problem, the contract may be terminated. 

A key Global Fund official stated that two to three LFA country team 

subcontracts are terminated each year based on information from fund 

portfolio managers on their poor performance. 

Although LFA central teams provide some performance feedback to their 

country teams, the scope and frequency of that feedback varies depending

on the LFA’s structure. Ten of the LFA country teams that participated in

Global Fund Does Not 

Assess LFAs 

Systematically and Lacks 

Formal Records of LFA 

Performance 

LFA Performance Assessment 

and Reporting Are Informal and 

Irregular 

 34Good practice for overseeing contractors suggests that contractors’ fulfillment of

established expectations should be systematically measured. See appendix II. 

Page 24 GAO-07-627 Global Health
our structured interviews told us that LFA central teams provide informal 

feedback about their performance. The central team at two of the six LFA 

organizations reviews all products before they reach the secretariat. At 

two other LFA organizations, reports are reviewed only if it is deemed 

necessary, and in those cases, regional coordinators or mentors may 

review the reports.35 At the remaining two LFA organizations, the 

distinctions between the country and central teams are less clear, because 

the reports are at least partially written by central team members. 

The lack of formal assessments limits the Global Fund’s access to the 

information needed to manage LFAs’ performance. The fund portfolio 

managers we interviewed said that their frequent interaction with country 

teams generally allows them to know which teams are performing well 

and which teams need improvement. However, Global Fund officials with 

LFA management responsibility stated that formalizing the process would 

allow the agency to establish LFA performance records and identify 

situations in which more oversight of LFAs by the Global Fund may be 

required. A working group of Global Fund experts echoed these concerns, 

reporting that despite extensive debate about the LFA model, the Global 

Fund had conducted little systematic assessment of the performance of 

individual LFA country teams.36

A prior attempt to introduce a tool to make LFA assessments more 

systematic was not successful, because use of the tool was not mandatory 

and fund portfolio managers did not see it as a priority. According to the 

Global Fund, the LFA manager conducted a pilot of an evaluation 

checklist as a tool for fund portfolio managers to systematically assess 

LFA performance. Secretariat staff stated that, because Global Fund 

management did not require fund portfolio managers to complete the 

checklist, very few portfolio managers used it. As of early 2007, the LFA 

manager was developing a revised tool to routinely collect staff input on 

LFAs. However, it is too early to determine whether this tool, when 

finalized and made available to staff, will capture the information needed 

to assess LFA performance. According to the LFA manager, integrating 

Lack of Assessment Records 

Limits Available Information on 

LFA Performance 

Global Fund Previously 

Attempted to Implement 

Systematic LFA 

Assessments 

 35Mentors are individuals from country teams that the central team has identified as high 

performers. 

36Challenges and Opportunities for the New Executive Director of the Global Fund - Seven

Essential Tasks” by Steve Radelet et.al. (Washington, D.C.: Oct. 2006). 

Page 25 GAO-07-627 Global Health
this tool into existing tasks and making it an explicit component of fund 

portfolio managers’ job descriptions would increase its use. 

Although Global Fund officials cited instances in which LFA country 

teams performed adequately, secretariat staff, key partners, and outside 

experts expressed concerns about some LFAs’ capacity to oversee grant 

recipients’ programmatic and procurement activities. To illustrate 

adequate LFA capacity and performance, secretariat staff identified cases

where LFA country teams have quickly identified problems with grants. 

For example, the majority of fund portfolio managers we interviewed 

noted that most LFA country teams performed financial oversight 

competently.

37 Similarly, a procurement officer described a country team 

that focused on supply management issues throughout the life of the grant 

and proved instrumental in resolving a large corruption problem. One fund 

portfolio manager described a country team that had enough knowledge of 

monitoring, evaluation, and procurement to understand an LFA 

subcontractor’s initial assessment of recipient capacity and, therefore, 

could use this information in subsequent reporting about grantee progress. 

Conversely, secretariat staff also cited multiple instances in which LFAs 

demonstrated lack of capacity that affected the conduct of their oversight

duties. In a recent Global Fund survey, secretariat employees who 

identified themselves as having sufficient exposure to LFAs to form an 

opinion reported mixed experiences regarding LFAs’ technical program 

and monitoring expertise.38 About half of the respondents disagreed with 

the statement that LFAs with whom they had worked provided “adequate” 

expertise on health and program issues. The remainder was about equally 

divided between those who agreed that health and program expertise was 

adequate and those who neither agreed nor disagreed. Global Fund 

employees’ assessments of the adequacy of LFAs’ expertise for monitoring 

LFA Performance and 

Capacity Reportedly Vary 

 37Of the 12 country teams that participated in our structured interviews, almost all team 

members had financial expertise but limited training in procurement or monitoring and

evaluation. 

38The Global Fund drafted a questionnaire that a contractor tested and administered 

anonymously in a Web-based survey from November 9 to 16, 2006 to the approximately 120 

Geneva-based Global Fund secretariat staff who use LFA services. The 75 staff who 

responded rated their agreement on more than 50 statements about LFA-related issues 

using a five-point scale of “Strongly Disagree, Disagree, Neither Agree nor Disagree, Agree, 

Strongly Agree” while being given the option on most questions of not answering if they

had “Insufficient experience to form an opinion.” We report responses for the 51 

operations staff, all of whom had direct contact with LFAs on a range of issues. 

Page 26 GAO-07-627 Global Health
and evaluation were similarly mixed. The survey also provided evidence 

that the service quality varies greatly among countries: about threequarters of the staff agreed with the statement that “within LFA firms there 

are substantial differences in service quality across countries.” 

In addition, Global Fund partners and outside experts have raised 

concerns about LFAs’ oversight capacity. UNAIDS officials said that they

have serious doubts about the capacity of LFAs to monitor program 

progress, specifically noting that LFAs have little understanding of how to 

weigh and balance various performance targets that are not of equal 

importance.39 For example, according to these officials, an LFA that lacks 

strong technical program capacity might not recognize that a recipient 

exceeding a simple performance target, such as training staff, may be 

trying to compensate for poor performance in more difficult target areas,

such as administering drugs to treat AIDS, TB, or malaria. Several other 

sources—a report commissioned by the Global Fund, our 2005 report, and 

several reports by an acknowledged expert on the Global Fund—also note 

problems with LFA capacity. (See app. II for a list of sources.) 

Since our report in June 2005, the Global Fund has taken steps to improve 

operations at its secretariat in Geneva while it continues to confront 

complex issues facing grant implementation at the country level. The 

Global Fund will continue to face important challenges, including 

evaluating the effectiveness of its investment of the billions of dollars it 

receives annually from the United States and other donors and the impact

of its programs over time. The Global Fund has improved the transparency 

of its periodic disbursement and grant renewal decisions by providing 

better documentation in its grant files. Delays in developing a systematic 

approach to assessing grant risk have left the Global Fund vulnerable to 

some of the risks associated with implementing grants in developing 

countries. However, the Global Fund board recognizes the importance of 

developing a more comprehensive approach to risk management, and the

secretariat has recently drafted principles to guide its development of a 

risk framework for the organization. In addition, the Global Fund’s lack of

a formal process for setting expectations and assessing and analyzing LFA 

Conclusions 

 39The Global Fund categorizes targets into three levels of complexity. The first two levels 

are considered to be “process” indicators, and include measures such as “people trained”

or “service points supported.” The third, more complex category, denotes “coverage” 

indicators and measures the number of individuals receiving services. The Global Fund is

also considering the most appropriate way to measure “impact” indicators. 

Page 27 GAO-07-627 Global Health
performance constrains its ability to determine the quality of the LFAs’ 

services, track LFA performance over time, and address ongoing capacity

issues. The lack of a formal assessment process also limits the information 

available to the Global Fund during its upcoming global retender of LFA 

contracts. 

To enhance Global Fund operations, we recommend that the Secretaries 

of State and HHS work with the Global Fund’s Board Chair and Executive 

Director to take the following two actions: 

• establish standardized expectations for LFA performance, and 

• require systematic assessments of LFA performance and the collection 

and analysis of LFA performance data to improve the management and 

oversight of LFAs. 

Written comments on a draft of this report from the Departments of State 

and Health and Human Services and the U.S. Agency for International 

Development are represented in the unified response received from the 

Office of the U.S. Global AIDS Coordinator. The Global Fund also 

provided written comments on the draft. Both entities agreed with the 

report’s findings, conclusions, and recommendations. The Office of the 

U.S. Global AIDS Coordinator stated that the report accurately reflected 

areas in which the Global Fund has made progress as well as areas in 

which more work remains to be done. The Office’s response noted that the 

United States will urge the Board to adopt concrete recommendations 

from several studies to improve the accountability and transparency of

Global Fund activities and will work with the Global Fund to improve its 

oversight and risk assessment mechanisms. The Global Fund stated that 

the report reinforced the importance of measures it has begun taking to 

better measure local fund agent performance. Regarding risk assessment, 

the Global Fund emphasized the role of its country-based and global 

partners in helping to track grant implementation and provide technical 

support as needed. (See apps. III and IV for their comments.) 

We are sending copies of this report to interested congressional 

committees and will make copies available to others on request. In 

addition, this report is available on GAO’s Web site at http://www.gao.gov. 

Recommendations for 

Executive Action 

Agency Comments 

Page 28 GAO-07-627 Global Health
If you or your staff have any questions, please contact me at (202) 512-3149

or gootnickd@gao.gov. Contact points for Offices of Congressional 

Relations and Public Affairs may be found on the last page of this report. 

Key contributors to this report are listed in appendix V. 

David M. Gootnick 

Director, International Affairs and Trade 

Page 29 GAO-07-627 Global Health
Appendix I: Objectives, Scope, and Appendix I: Objectives, Scope, and Methodology 

Methodology 

To assess the Global Fund’s efforts to improve documentation of 

performance-based-funding decisions, we analyzed the forms used to 

collect data on grant performance and discussed with Global Fund 

officials how the forms have changed since GAO’s 2005 report. We met 

with officials from all of the entities that have current contracts to serve as

local fund agents and with officials from the Office of the Global AIDS 

Coordinator, UNAIDS, and the World Bank—-the Global Fund’s key 

technical partners—to discuss how documentation of the Global Fund’s 

decisions has changed and whether it has improved. 

To review information in the grant files used to support performancebased funding decisions, we analyzed two separate simple random 

probability samples of grant funding decisions using a separate data 

collection instrument for each sample. The first sample consisted of 80 of

the 348 grants that the Global Fund assessed for performance-based 

funding disbursements between January 1 and October 1, 2006. The 

second sample consisted of 45 of the 65 grants that the Global Fund 

assessed for phase 2 grant renewal during the same time period.1

 We chose 

January 2006 as the starting point for our sample because Global Fund 

officials told us that their new disbursement decision worksheet—created 

to address GAO’s recommendation that they better document their 

decisions—was fully implemented by the end of 2005. With our two 

probability samples, each member of the study population had a nonzero 

probability of being included, and that probability could be computed for 

any member. Each sample case file was subsequently weighted in the 

analysis to account statistically for all the case files in the population, 

including the files that were not selected. 

Because we followed a probability procedure based on random selections, 

our samples are only one of a large number of samples that we might have 

drawn (for both the grant disbursement and phase 2 file reviews). Since 

each sample could have provided different estimates, we express our 

confidence in the precision of our particular sample’s results as 95 percent 

confidence intervals. These are intervals that would contain the actual 

population values for 95 percent of the samples we could have drawn. All 

percentage estimates provided in this report based on our samples have 95 

percent confidence intervals of within plus or minus 13 percentage points.

 1

We did not consider grants for the disbursement sample that received their first 

disbursement of funds during the period so our results were not skewed by problems that

commonly accompany grants when they start. 

Page 30 GAO-07-627 Global Health
Appendix I: Objectives, Scope, and 

Methodology 

For each grant in our disbursement sample, we requested the grant 

recipient’s Progress Update and Disbursement Request report, the Local 

Fund Agent Recommendation report, and the Global Fund’s Disbursement 

Decision-Making Worksheet. For the phase 2 decision sample, we 

requested the following documents for each grant: 

• Phase 2 Grant Scorecard (the in-house version that goes to the panel) 

• Phase 2 Grant Scorecard (the panel’s version that goes to the board) 

• Documentation of the board’s decision with any explanation or

justification of the decision (whether this is in the form of a scorecard or 

some other format) 

• Phase 2 Panel Minutes 

• Board Notes 

• Grant Performance Report 

• Annex A Attachments 2 and 3 

• Local fund agent Phase 2 Assessment Report 

We gathered the information from the documents for our data collection 

instruments and verified the data that we used to support our findings. 

Our file review consisted of a number of checks on the presence or 

absence of an array of qualitative and contextual information that the 

Global Fund forms specify as important for grant decision-making and that 

therefore should be provided by those responsible for filling them out. We 

did not evaluate the appropriateness or accuracy of the judgments made 

on the basis of the narrative or contextual information provided in the 

documents; we focused on the issue of whether the contextual or 

narrative information provided was relevant to particular judgments or 

decisions.2

 2

A limitation of our analysis was that we did not evaluate the adequacy of the information 

provided, as determining adequacy would have required us to make judgments requiring

substantial additional grant-specific information not contained in the grant files.

Page 31 GAO-07-627 Global Health
Appendix I: Objectives, Scope, and 

Methodology 

In our analysis of the disbursement files, while we examined information 

contained in other documents, we focused mostly on the Disbursement 

Decision-Making Form, due to the fact that this was the key form that the 

Global Fund instituted for disbursement-related decision-making since our

last report. In this form, we checked for the presence or absence of the

following pieces of information: 

• Fund portfolio manager/cluster explanation for differences in fund 

portfolio manager/cluster and LFA ratings 

• Fund portfolio manager’s explanation for performance rating

• Fund portfolio manager’s explanation for differences in funding decision 

with the principal recipient request and LFA recommendation 

• Fund portfolio manager’s check-offs on an array of grant decision-making 

issues such as performance evaluation, financial considerations, future 

and outstanding requirements, etc. 

• Fund portfolio manager’s explanation for array of contextual issues (e.g., 

governance, general management, and external factors) 

• Fund portfolio manager’s explanation for required documents and 

conditions precedent items 

In the phase 2 files we focused on the Grant Scorecard, as this is the key 

Global Fund decision-making document for this phase, although we 

performed checks on several other documents as well. We checked for the 

presence or absence of the following pieces of information in the 

following phase 2-related documents; all items are for the Grant Scorecard 

unless otherwise noted: 

• Evaluation unit’s explanation for nonconcurrence with fund portfolio 

manager/cluster rating 

• General explanation for difference between fund portfolio manager/cluster 

recommendation and the LFA’s recommendation 

• Evaluation unit’s explanation for difference between fund portfolio 

manager/cluster recommendation and the LFA’s recommendation 

• General explanation for difference in the recommended amounts between 

Global Fund financial review and cluster leader phase 2 

Page 32 GAO-07-627 Global Health
Appendix I: Objectives, Scope, and 

Methodology 

• General explanation for difference in the recommended amounts between 

LFA and fund portfolio manager/cluster leader (i.e. the Global Fund) 

phase 2 

• Fund portfolio manager/cluster identification of material issues with 

reliability of principal recipient’s data 

• Fund portfolio manager/cluster explanation for phase 2 rating 

• Fund portfolio manager/cluster explanation for phase 2 recommendation 

• (LFA phase 2 assessment) report-specific conditions identified by LFA for 

‘Conditional Go’ recommendations 

• Time-bound actions identified by portfolio manager/cluster for 

‘Conditional Go’ recommendations 

To assess the Global Fund’s progress in implementing a risk assessment 

model and early warning systems for its grants, we followed up on the risk 

assessment model and early warning system described in our 2005 report 

with Global Fund officials. In addition, we reviewed international 

standards for risk that establish the criteria for assessing risk developed 

by the Committee on Sponsoring Organizations of the Treadway 

Commission. We also discussed the need for a risk assessment model and 

early warning system with key Global Fund staff, key Global Fund 

partners, UNAIDS, World Bank, and OGAC, and with the Global Fund 

Inspector General and LFA officials. In addition, we reviewed Global Fund

board notes and the Global Fund’s draft outline of Guiding Principles for a 

Risk Management Framework. In their technical review of our draft, 

Global Fund officials clarified the distinction between the risk assessment 

model that was not implemented and the current early alert and response 

system, and they provided additional information on the current status of 

the early alert and response system. We modified the risk assessment 

section of the draft based on our analysis of this information. 

To assess how the Global Fund oversees and measures the capacity and 

performance of local fund agents, we established criteria for good 

practices in performance assessment, consulted key reports and 

documents, met with relevant personnel, conducted structured interviews 

with LFA country teams, and analyzed the structured interview data using 

a content analysis framework. We consulted GAO experts in performance 

Page 33 GAO-07-627 Global Health
Appendix I: Objectives, Scope, and 

Methodology 

assessment and contracting, good practice documents from the 

Government Performance and Results Act,3

 performance-based 

contracting literature, internal control literature, and training development 

literature. (See app. II) To understand Global Fund policies and 

requirements regarding LFA performance, we reviewed Global Fund 

documentation, including guidelines for LFA work, the Global Fund’s 

operational policy manual, LFA manager terms of work, and LFA 

framework contract forms, as well as relevant evaluative reports published 

by the Global Fund and development experts. We meet with key Global 

Fund officials in Geneva, Switzerland, including the fund portfolio 

managers and members of the Portfolio Services and Projects Team, 

representatives from all LFA central teams, selected LFA subcontractors, 

and recognized experts on the Global Fund to discuss the current 

practices and potential difficulties of the LFA system. We also reviewed 

the methodology and results of a survey of Geneva-based Global Fund 

secretariat staff who are users of LFAs conducted by a Global Fund 

contractor in November of 2006. 

Additionally, to support our review of issues related to LFA capacity and 

performance, we conducted structured telephone interviews with a 

nonprobability sample of 12 LFA country teams out of a total of 102 LFA 

country teams worldwide.4

 We selected country teams for this sample 

based on criteria such as the size and amount of the grants that the LFA 

oversaw, whether the LFA was located within the country, and whether 

the LFA acted as a mentor to other LFA country teams. The purpose of 

these 12 interviews was to obtain information on the views of these 

important participants in the Global Fund process; we did not obtain a 

representative perspective of the views of all 102 country teams. We pretested our questions with two of our initial respondents and refined our 

questions based on their input. We followed up via e-mail with our 

respondents to obtain supplementary information. To summarize the 

open-ended responses and developed categories for the analysis, we first 

grouped interview responses by general categories, based on our 

objectives, criteria, and inductive observation. Within each of these 

general categories, we then further grouped the data into subcategories 

 3

Government Performance and Results Act of 1993, Pub. L. No. 103-62, 107 Stat. 285. 

4

Results from our nonprobability sample cannot be used to generalize to the overall 

population of LFA country teams because, in a nonprobability sample, some elements of 

the population being studied have no chance or an unknown chance of being selected as

part of the sample. 

Page 34 GAO-07-627 Global Health
Appendix I: Objectives, Scope, and 

Methodology 

based on the emerging themes. To ensure the validity and reliability of our 

analysis, these subcategories were reviewed by a methodologist, who 

proposed modifications. After discussion of these suggestions, we 

determined a final set of subcategories. An analyst and a methodologist 

independently tallied the number of respondents providing information in 

each subcategory, compared their tallies, and reconciled any variation. 

Page 35 GAO-07-627 Global Health
Appendix II: Other Sources Cited 

Page 36 GAO-07-627 

Appendix II: Other Sources Cited 

• GAO, Strategic Issues Web pages on the Government Performance and 

Results Act (GPRA)

• GAO, Internal Control Management and Evaluation Tool. GAO-01-

1008G. Washington D.C.: Aug. 2001.

• Office of Federal Procurement Policy, Seven Steps to Performance-Based 

Services Acquisition, see: 

www.acqnet.gov/Library/OFPP/BestPractices/pbsc

• GAO, Contract Management: Guidance Needed for Using Performancebased Service Contracting. GAO-02-1049. Washington, D.C.: Sept. 23, 2002. 

• GAO, Contract Management: Guidance Needed for Using PerformanceBased Service Contracting. GAO-02-1049. Washington, D.C.: 2002. 

Principles for Contractor 

Management 

Analyses of LFA Capacity 

and Performance 

• GAO, Internal Control Management and Evaluation Tool. GAO-01-1008G. 

Washington, D.C.: 2001.

• Kruse, Stein-Erik, and Jens Claussen. Review of the Roles, Functions and

Performance of Local Fund Agents. Centre for Health and Social 

Development and Nordic Consulting Group; 2004.

• Office of Federal Procurement Policy, Seven Steps to Performance-Based

Services Acquisition. See: 

www.acqnet.gov/Library/OFPP/BestPractices/pbsc

• Radelet, Steven et al. Challenges and Opportunities for the New 

Executive Director of the Global Fund: Seven Essential Tasks. Global 

Fund Working Group, Center for Global Development, Washington D.C.: 

October 2006. 

• Radelet, Steven. The Global Fund to Fight AIDS, TB, and Malaria: 

Progress, Potential, and Challenges for the Future. Center for Global 

Development, Washington D.C.: 2004.

Global Health
Appendix III: Comments from the Global Appendix III: Comments from the Global Fund 

Fund 

Page 37 GAO-07-627 Global Health
Appendix III: Comments from the Global 

Fund 

Page 38 GAO-07-627 Global Health
Appendix III: Comments from the Global 

Fund 

Page 39 GAO-07-627 Global Health
Appendix IV: Comments from Departments of State and 

Health and Human Services and U.S. Agency for Appendix IVInternational Development : Comments from Departments 

of State and Health and Human Services and 

U.S. Agency for International Development 

Page 40 GAO-07-627 Global Health
Appendix IV: Comments from Departments of State and 

Health and Human Services and U.S. Agency for 

International Development 

Page 41 GAO-07-627 Global Health
Appendix IV: Comments from Departments of State and 

Health and Human Services and U.S. Agency for 

International Development 

Page 42 GAO-07-627 Global Health
Appendix IV: Comments from Departments of State and 

Health and Human Services and U.S. Agency for 

International Development 

Page 43 GAO-07-627 Global Health
Appendix V: GAO Contact and Staff Acknowledgments

Page 44 GAO-07-627 

Appendix V: GAO Contact and Staff 

Acknowledgments 

David Gootnick (202) 512-3140 

In addition to the person named above, Audrey Solis, Assistant Director; 

Tom Zingale; Jeffrey Baldwin-Bott; Bruce Kutnick; Barbara Steel-Lowney;

David Dornisch; and Reid Lowe made key contributions to this report. 

Kathryn Bernet, Antoine Clark, Etana Finkler, Hynek Kalkus, and Tracy 

 Guerrero provided technical support. 

Global Health

GAO Contact 

Staff 

Acknowledgments 

(320416) 
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