a

GAO

United States General Accounting Office

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
• 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. A key challenge involves locally 

based governance structures, many of which are not currently performing in a 

manner envisioned by the Fund. 

• 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’s ability to approve and finance additional grants is threatened 

by a lack of sufficient resources. Pledges made through the end of 2003 

are insufficient to cover more than a small number of additional grants 

and without significant new pledges, the Fund will be unable to support 

all of the already approved grants beyond their initial 2-year agreements. 

Pledges Made, Amount Received, and Grant Proposals Approved 

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 negotiations. Five-year figures are potential, rather than guaranteed, commitments. 

Note: A shortfall in the funding of already approved grants is evident when 5-year commitments are 

compared 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. 

• Improvements in the Fund's grant-making processes have enhanced its ability 

to achieve its key objectives, but challenges remain. These challenges include 

ensuring that grants add to and complement existing spending on HIV/AIDS, 

TB, and malaria and that recipients have the capacity to effectively use grants. 

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. Established in 

January 2002, the Global Fund (the 

Fund) aims to rapidly disburse grants 

to augment existing spending on the 

prevention and treatment of these 

three diseases 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 and is expected to 

remain its single largest donor. In 

this study, GAO was asked to assess 

(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 

raise money; and (4) its grant-making

process. 

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 agreed 

with our findings. 

www.gao.gov/cgi-bin/getrpt?GAO-03-601.

To view the full report, including the scope 

and methodology, click on the link above. 

For more information, contact David Gootnick 

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

Highlights of GAO-03-601, a report to the 

Chairman, Subcommittee on Foreign 

Operations, Export Financing, and Related 

Programs, House Committee on 

Appropriations 

May 2003

GLOBAL HEALTH 

Global Fund to Fight AIDS, TB and Malaria 

Has Advanced in Key Areas, but Difficult 

Challenges Remain 
Page i GAO-03-601 Global Health

Contents

Letter 1

Results in Brief 2

Background 5

The Fund Has Established Key Governance Structures, but 

Implementation Challenges Impede Ability to Rapidly Disburse 

Funds 7

The Fund Developed Comprehensive Oversight Systems and Issued 

Procurement Guidance, but Systems Face Challenges, and 

Guidance Is Still Evolving 20

Lack of Resources Threatens Fund’s Ability to Continue to Approve 

and Finance Grants 32

Improvements in Grant-Making Processes Enhance Fund’s Ability to 

Achieve Key Objectives, but Challenges Remain 36

Agency Comments and Our Evaluation 44

Appendixes

Appendix I: Objectives, Scope, and Methodology 45

Appendix II: Status of Round 1 Grants 48

Appendix III: Drug Procurement Cycle 54

Appendix IV: Indicators of Need for Recipient Countries 56

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

Malaria 60

Appendix VI: Joint Comments from the Departments of Health and Human 

Services and State, and the U.S. Agency for International 

Development 67

Appendix VII: GAO Contact and Staff Acknowledgments 69

GAO Contact 69

Staff Acknowledgments 69

Tables Table 1: The Secretariat’s Budget for 2003 12

Table 2: Signed Grant Agreements—Funds Committed and 

Disbursed 48

Table 3: Grant Agreements in the Pipeline 52

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

Process 53
Contents

Page ii GAO-03-601 Global Health

Figures Figure 1: Timeline of the Fund’s First Year 6

Figure 2: Approved Grants, by Disease and by Region 7

Figure 3: Governance Structure of the Fund as of April 1, 2003 8

Figure 4: The Structure of the Fund’s Board as of April 1, 2003 10

Figure 5: Anticipated Grant Expenditures for Drugs and Health 

Products 27

Figure 6: Anticipated Expansion in Approved Proposal Dollars 

through 2004 (actual and estimated 2-year 

commitments) 33

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

Approved 35

Figure 8: Global Fund Proposal Review Process 37

Figure 9: Grant Money by Country Income Level 38

Abbreviations

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

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Page 1 GAO-03-601 Global Health

United States General Accounting Office

Washington, D.C. 20548

A

May 7, 2003 Letr

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 Fund1

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. 

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.
Page 2 GAO-03-601 Global Health

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.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 countrylevel structures resulted in key participants being unsure of their roles in 

the proposal process and unprepared to support grant implementation. In 

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. 
Page 3 GAO-03-601 Global Health

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 
Page 4 GAO-03-601 Global Health

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 
Page 5 GAO-03-601 Global Health

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 subSaharan 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 grantmaking 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.
Page 6 GAO-03-601 Global Health

Figure 1: Timeline of the Fund’s First Year

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).3

 These grants total nearly $3.7 billion ($1.5 billion over the first 2 years) 

and cover all three diseases.

1/02 11/02 1/03 4/02

Source: GAO analysis of Fund documents.

First round of grants approved 

Dr. Richard Feachem appointed 

as Executive Director of the Fund

Global Fund launched 

from Geneva

First grant 

agreements signed

Second round of 

grants approved

3

This country total does not include one global grant and grants to two regions. 
Page 7 GAO-03-601 Global Health

Figure 2: Approved Grants, by Disease and by Regiona

a

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

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. 

1%

All

3%

TB/AIDS

13%

TB

18%•

Malaria

65%

AIDS

Source: GAO analysis of Fund data.

•

•

•

Grant dollars by disease Grant dollars by region

1%

Middle East and 

North Africa

•

6%

South Asia

•

10%

Latin America and 

the Caribbean

•

7%

Europe and 

Central Asia

15%•

East Asia and 

the Pacific

61%•

Sub-Saharan 

Africa
Page 8 GAO-03-601 Global Health

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

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.

Headquarters Level

Trustee 

(World Bank) Secretariat Technical Review Panel 

Board

Country Level

Country Coordinating Mechanism (CCM)

Local Fund 

Agent 

Principal recipient(s)

Subrecipient(s)

Government 

(e.g., Ministry 

of Health)

Private sector 

(e.g., Chamber of 

Commerce)

Civil society 

(e.g., faith-based 

groups)

Donors 

(multilateral and 

bilateral)

Source: GAO analysis of Fund documents.
Page 9 GAO-03-601 Global Health

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.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.

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.
Page 10 GAO-03-601 Global Health

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

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.)

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. 

Voting members

Nonvoting members

1 Representative of communities affected 

by the diseases

1 WHO representative

1 World Bank representative

1 UNAIDS representative

1 Swiss citizen appointed by the board

Donor voting group

7 Government representatives

European Commission (Belgium, Austria) 

France (Germany, Luxembourg, Spain) 

Italy 

Japan 

Sweden (Denmark, Ireland, Netherlands, 

Norway) 

United Kingdom (Canada, Switzerland) 

USA 

2 Private sector representatives

McKinsey & Company

Bill & Melinda Gates Foundation

Beneficiary voting group

7 Government representatives

Ukraine (Eastern Europe) 

Pakistan (Eastern Mediterranean Region) 

Uganda (Eastern & Southern Africa) 

Brazil (Latin America and the Caribbean) 

Thailand (South East Asia) 

Nigeria (West and Central Africa) 

China (Western Pacific Region)

2 NGO representatives 

Health Rights Action Group (developing country)

French NGO AIDES (developed country)

Chair

U.S. Secretary of Health and Human Services

Vice Chair

Deputy Permanent Secretary, Ministry of Public Health, Thailand

Source: GAO analysis of Fund documents.
Page 11 GAO-03-601 Global Health

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.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). 

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.
Page 12 GAO-03-601 Global Health

Table 1: The Secretariat’s Budget for 2003

Source: GAO analysis of Fund documents.

a

Figures may not add up due to rounding

• 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.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/UNAIDS7 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 

Dollars in millons

Item Description Cost

Percentage

of budget

Local Fund 

Agent fees

Based on estimates for the 

assessment of principal recipients and 

annual oversight work per grant

$16.4 42%

Staff Includes salaries and benefits 11.0 28

Professional

services

Includes $2 million in fees to the World 

Bank as trustee and $725,000 to WHO 

for administrative services

5.0 13

Travel Includes secretariat and board travel 2.1 5

Other Includes facilities, communication 

materials, information technology 

infrastructure, meetings, fixed assets, 

and other items

4.3 11

Total $38.7a 100%a

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.
Page 13 GAO-03-601 Global Health

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.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.

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. 
Page 14 GAO-03-601 Global Health

• 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.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).10 The Fund may 

contract with additional organizations as the need arises and expects to 

receive bids from potential LFAs by August 2003. 

9

In addition, one grant agreement is with a private sector entity and the principal recipient 

for another has yet to be determined.

10According 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.
Page 15 GAO-03-601 Global Health

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 process11 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 

11NGO Participation in the Global Fund, a Review Paper, International HIV/AIDS Alliance, 

October 2002.
Page 16 GAO-03-601 Global Health

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 

proposals12 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,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. 

12The 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 longrunning conflict were excluded from this analysis. 

13Global Fund Update for NGOs and Civil Society, June 2002.
Page 17 GAO-03-601 Global Health

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.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

14The 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.
Page 18 GAO-03-601 Global Health

of the issues raised above.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.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. 

15These 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. 

16The Cuba meeting was convened at a larger forum on HIV/AIDS and sexually transmitted 

diseases in Latin America and the Caribbean.

 
Page 19 GAO-03-601 Global Health

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,17 but this 

relationship is causing delays and other problems, and the Fund is 

considering alternate arrangements.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. 

17The 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.

18This 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.
Page 20 GAO-03-601 Global Health

The board asked the secretariat to look into pursuing enhanced legal 

benefits for the Fund from Swiss authorities.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. 

19The 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.
Page 21 GAO-03-601 Global Health

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, 
Page 22 GAO-03-601 Global Health

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. 
Page 23 GAO-03-601 Global Health

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 grants20 comes 

after 2 years, when the Fund expects to begin seeing evidence that grantsupported 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.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. 

20Most grants last for 5 years.

21In September 2000, world leaders at the U.N. Millennium Summit agreed to a set of timebound, measurable goals for combating poverty, hunger, disease, illiteracy, environmental 

degradation, and discrimination against women. 
Page 24 GAO-03-601 Global Health

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.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.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 

22Representatives 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. 

23These officials said that they expect to disburse about $750 million in 2003 but cautioned 

that this figure is not certain. 
Page 25 GAO-03-601 Global Health

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-ofinterest 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. 
Page 26 GAO-03-601 Global Health

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 products24 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. 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.26

24The 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). 

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

26The Fund has not provided a breakdown of anticipated expenditures for the full life of 

grants approved in the first round.
Page 27 GAO-03-601 Global Health

Figure 5: Anticipated Grant Expenditures for Drugs and Health Products

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. 

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

44% • Drugs and 

health productsb

$267 million

56%•

Otherc

$340 million

47% • Drugs and 

health productsb

$415 million

53%•

Otherc 

$468 million

Source: GAO analysis of Fund data.

Round 1 (April 2002)a Round 2 (January 2003)a
Page 28 GAO-03-601 Global Health

will be treated over the life of these grants.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 

27The 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.
Page 29 GAO-03-601 Global Health

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. 
Page 30 GAO-03-601 Global Health

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.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 

28As 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.
Page 31 GAO-03-601 Global Health

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.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.

29While 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.
Page 32 GAO-03-601 Global Health

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.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 round31 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. 

30Pledges 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.

31The 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. 
Page 33 GAO-03-601 Global Health

Figure 6: Anticipated Expansion in Approved Proposal Dollars through 2004 (actual 

and estimated 2-year commitments)

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.

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.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 

Dollars in millions

0

200

400

600

800

1,000

1,200

1,400

1,600

1,800

2,000

Round 1a Round 2a Round 3b

2003 

(October)

Round 4b

2004 

(March)

Round 5b

2004

(October)

608

884

1,600

1,900 1,900

Source: Adapted by GAO from Fund documents.

32The 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.
Page 34 GAO-03-601 Global Health

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 longterm obligations for the Fund. 
Page 35 GAO-03-601 Global Health

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

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.

Dollars in millions

0

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

Source: GAO analysis of Fund documents.

Grant proposals approved - round 2

Grant proposals approved - round 1

Pledges/amount received

608

884

935

1,780

3,374

1,595

2,082

3,677

1,492

Total pledges 

through 2008a

Pledges through 

the end of 2003

Amount received 

as of 3/31/03

2-yr. 

commitmentsb

5-yr. 

commitmentsb
Page 36 GAO-03-601 Global Health

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 2.33 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.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).

33This 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.

34In 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. 
Page 37 GAO-03-601 Global Health

Figure 8: Global Fund Proposal Review Process

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

Call for 

proposals

Proposal in-flow 

and screening 

by secretariat

Technical review 

panel evaluation

Board meeting/ 

grant decisions Final approval Additional 

clarifications

Technical Review 

Panel selection

Source: Adapted by GAO from Fund documents.
Page 38 GAO-03-601 Global Health

from grant eligibility. 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

a

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

35Members 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.

70% • Low income

27% • Lower middle income

•

3%

Upper middle income

Source: GAO analysis of Fund data.
Page 39 GAO-03-601 Global Health

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 highincome countries are now excluded from eligibility for Fund money,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 need37 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.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,39 as well as from eight

36Previously, 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.

37According to Fund documents, disease-related need encompasses both current and 

potential burden of disease.

38The 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. 

39The United States, Canada, Japan, France, Germany, Italy, and the United Kingdom.
Page 40 GAO-03-601 Global Health

of the Development Assistance Committee40 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.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 

40See footnote 35 for Development Assistance Committee membership.

41Grant 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.” 
Page 41 GAO-03-601 Global Health

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.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. 

42In 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.
Page 42 GAO-03-601 Global Health

 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 longterm 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
Page 43 GAO-03-601 Global Health

inflation, that are not conducive to growth or poverty reduction.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 

Account44--–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.

43Increases 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.

44On 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.
Page 44 GAO-03-601 Global Health

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
Page 45 GAO-03-601 Global Health

Appendix I

Objectives, Scope, and Methodology AAppenednxidexiIs

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 
Appendix I

Objectives, Scope, and Methodology 

Page 46 GAO-03-601 Global Health

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.
Appendix I

Objectives, Scope, and Methodology 

Page 47 GAO-03-601 Global Health

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. 
Page 48 GAO-03-601 Global Health

Appendix II

Status of Round 1 Grants ApendxiI

Table 2: Signed Grant Agreements—Funds Committed and Disbursed

No Country Program

Principal 

recipient

Local Fund 

Agent

Date of

signed

agreement

Total funds

committed

(in U.S.

dollars)a

Latest

disbursement

dateb

Total funds

disbursed as

of April 22,

2003

(in U.S.

dollars)

1 Argentina HIV/AIDS U.N. Development 

Program (UNDP)

Pricewaterhouse

Coopers (PWC)

29-Jan-03 $12,177,200 21-Mar-03 $1,500,000

2 Benin Malaria UNDP PWC 20-Mar-03 2,389,185 14-Apr-03 341,021

3 Burundi HIV/AIDS Minsitry of Health PWC 04-Apr-03 4,877,000 17-Apr-03 554,100

4 Cambodia HIV/AIDS Ministry of Health, 

Kingdom of 

Cambodia

KPMG 27-Jan-03 11,242,538 17-Apr-03 95,919

5 China TB Chinese Center 

for Disease 

Control and 

Prevention, 

Ministry of Health

U.N. Office for 

Project Services 

(UNOPS)

30-Jan-03 25,370,000 10-Apr-03 1,200,000

6 China Malaria Chinese Center 

for Disease 

Control and 

Prevention, 

Ministry of Health

UNOPS 30-Jan-03 3,523,662 10-Apr-03 542,800

7 Ethiopia TB Ministry of Health KPMG 18-Mar-03 10,962,600

8 Ghana HIV/AIDS The Ministry of 

Health of the 

Republic of Ghana

PWC 12-Dec-02 4,965,478 18-Dec-02 429,599

9 Ghana TB The Ministry of 

Health of the 

Republic of Ghana

PWC 12-Dec-02 2,336,940 18-Dec-02 468,270

10 Haiti HIV/AIDS Fondation 

SOGEBANK

Mérové-Pierre - 

Cabinet 

d'ExpertsComptablesc

12-Dec-02 17,945,067 10-Feb-03 2,690,782

11 Haiti HIV/AIDS UNDP Mérové-Pierre - 

Cabinet 

d'ExpertsComptablesc

12-Dec-02 6,754,697 10-Feb-03 926,762

12 Honduras HIV/AIDS UNDP Pricewaterhouse

Coopers 

Interamerica S. 

de R.L.

29-Jan-03 12,583,466 2-Apr-03 685,735
Appendix II

Status of Round 1 Grants

Page 49 GAO-03-601 Global Health

13 Honduras TB UNDP Pricewaterhouse

Coopers 

Interamerica S. 

de R.L.

29-Jan-03 3,790,500 2-Apr-03 514,731

14 Honduras Malaria UNDP Pricewaterhouse

Coopers 

Interamerica S. 

de R.L.

29-Jan-03 4,096,050 2-Apr-03 379,889

15 India TB Ministry of Health World Bank (in 

process of being 

finalized)

30-Jan-03 5,650,999

16 Indonesia TB Ministry of Health PWC 27-Jan-03 21,612,265 13-Mar-03 750,000

17 Kenya HIV/AIDS Sanaa Art 

Promotions

PWC 30-Mar-03 2,650,813 15-Apr-03 137,270

18 Kenya HIV/AIDS KENWA PWC 30-Mar-03 220,875 15-Apr-03 8,500

19 Lao 

People's 

Democratic 

Republic

HIV/AIDS Ministry of Health, 

Department of 

Hygiene & 

Prevention

KPMG 05-Feb-03 1,307,664

20 Lao 

People's 

Democratic 

Republic

Malaria Ministry of Health, 

Department of 

Hygiene & 

Prevention

KPMG 05-Feb-03 3,155,152

21 Madagascar Malaria Population 

Services 

International

PWC 05-Feb-03 1,482,576 12-Mar-03 591,931

22 Malawi HIV/AIDS National Aids 

Committee

PWC 10-Feb-03 41,751,500

23 Moldova HIV/AIDS

-TB

Ministry of Health PWC 20-Mar-03 5,257,941 22-Apr-03 880,000

24 Mongolia TB Ministry of Health UNOPS 05-Feb-03 644,000 9-Apr-03 42,960

25 Morocco HIV/AIDS Ministry of Health PWC 29-Jan-03 4,738,806 21-Feb-03 420,000

26 Panama TB UNDP PWC 10-Feb-03 440,000 20-Mar-03 112,000

27 Rwanda HIV/AIDS

-TB

Ministry of Health Crown Agents 10-Apr-03 8,409,268 17-Apr-03 790,854

28 Senegal HIV/AIDS National AIDS 

Council of 

Senegal

KPMG 10-Feb-03 6,000,000 28-Feb-03 600,000

(Continued From Previous Page)

No Country Program

Principal 

recipient

Local Fund 

Agent

Date of

signed

agreement

Total funds

committed

(in U.S.

dollars)a

Latest

disbursement

dateb

Total funds

disbursed as

of April 22,

2003

(in U.S.

dollars)
Appendix II

Status of Round 1 Grants

Page 50 GAO-03-601 Global Health

29 Senegal Malaria National Strategic 

Plan to Fight 

Malaria, Ministry 

of Health

KPMG 10-Feb-03 4,285,714 28-Feb-03 350,000

30 Serbia HIV/AIDS Economics 

Institute

UNOPS 16-Apr-03 2,718,714

31 Sri Lanka Malaria Ministry of Health 

of Sri Lanka

PWC 19-Dec-02 730,140 11-Feb-03 176,573

32 Sri Lanka Malaria Lanka Jatika 

Sarvodaya 

Shramadana 

Sangamaya

PWC 19-Dec-02 4,467,480 11-Feb-03 752,893

33 Sri Lanka TB Ministry of Health 

of Sri Lanka

PWC 19-Dec-02 2,384,980 11-Feb-03 478,073

34 Sri Lanka TB Lanka Jatika 

Sarvodaya 

Shramadana 

Sangamaya

PWC 19-Dec-02 475,020 11-Feb-03 75,260

35 Tajikistan HIV/AIDS UNDP PWC 31-Mar-03 1,474,520 22-Apr-03 206,702

36 Tanzania Malaria The Ministry of 

Health of the 

Government of the 

United Republic of 

Tanzania

Pricewaterhouse

Coopers Limited

11-Dec-02 11,959,076 4-Feb-03 489,478

37 Uganda HIV/AIDS Ministry Of 

Finance, Planning 

And Economic 

Development Of 

The Government 

Of Uganda

PWC 06-Mar-03 36,314,892

38 Ukraine HIV/AIDS National AIDS 

Foundation

PWC 19-Mar-03 6,150,000

39 Ukraine HIV/AIDS Ministry of Health PWC 29-Jan-03 16,925,200 17-Apr-03 481,926

40 Ukraine HIV/AIDS UNDP PWC 17-Feb-03 1,895,011

41 Worldwide 

regions

HIV/AIDS World Lutheran 

Federation

KPMG-Geneva 29-Jan-03 485,000

42 Zambia HIV/AIDS Central Board of 

Health

PWC 30-Mar-03 21,214,271

43 Zambia TB Central Board of 

Health

PWC 30-Mar-03 12,447,294

(Continued From Previous Page)

No Country Program

Principal 

recipient

Local Fund 

Agent

Date of

signed

agreement

Total funds

committed

(in U.S.

dollars)a

Latest

disbursement

dateb

Total funds

disbursed as

of April 22,

2003

(in U.S.

dollars)
Appendix II

Status of Round 1 Grants

Page 51 GAO-03-601 Global Health

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.

44 Zambia HIV/AIDS Churches Health 

Association

PWC 30-Mar-03 6,614,958

45 Zambia TB Churches Health 

Association

PWC 30-Mar-03 2,307,962

46 Zanzibar Malaria Ministry of Health PWC 06-Mar-03 781,220

47 Zimbabwe Malaria Ministry of Health PWC 05-Feb-03 6,716,250

Total signed agreements as of April 22, 2003 $366,683,944 $17,674,028

(Continued From Previous Page)

No Country Program

Principal 

recipient

Local Fund 

Agent

Date of

signed

agreement

Total funds

committed

(in U.S.

dollars)a

Latest

disbursement

dateb

Total funds

disbursed as

of April 22,

2003

(in U.S.

dollars)
Appendix II

Status of Round 1 Grants

Page 52 GAO-03-601 Global Health

Table 3: Grant Agreements in the Pipeline

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. 

No Country Program Principal recipient

Local 

Fund 

Agent

Date of 

signed 

agreement

Total funds

committed

(in U.S.

dollars)a

Latest

disbursement

dateb

Total funds

disbursed as of

April 22, 2003

(in U.S. dollars)

48 South 

Africa

HIV/AIDS

-TB

National Treasury 

(Soul City)

PWC Not yet signed $2,354,000

49 South 

Africa

HIV/AIDS

-TB

National Treasury 

(Love Life)

PWC Not yet signed 12,000,000

50 South 

Africa

HIV/AIDS

-TB

National Treasury 

(Kwazulu Natal 

Sub-CCM)

PWC Not yet signed 26,741,529

51 Tanzania HIV/AIDS President's Office of 

Regional 

Administration & 

Local Government 

(PORALG)

PWC Not yet signed 5,400,000

52 Zambia Malaria Central Board of 

Healthc

PWC Not yet signed 17,892,000

53 Zambia Malaria Churches Health 

Associationc

PWC Not yet signed

54 Zambia HIV/AIDS Minsitry of Finance 

& National 

Planningc

PWC Not yet signed 14,468,771

55 Zambia HIV/AIDS Zambia National 

AIDS Networkc

PWC Not yet signed

56 Zambia TB Zambia National 

AIDS Network

PWC Not yet signed 1,644,744

57 Zimbabwe HIV/AIDS National Aids 

Council

PWC Not yet signed 10,300,000

Total agreements in the pipeline as of April 22, 2003 $90,801,044
Appendix II

Status of Round 1 Grants

Page 53 GAO-03-601 Global Health

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

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.

No Country Program

Principal 

recipient

Local Fund 

Agent

Date 

agreement 

expected to 

be signed

Total funds

committed

(in U.S.

dollars)a

Latest

disbursement

dateb

Total funds

disbursed as of

April 22, 2003

(in U.S. dollars)

58 Chile HIV/AIDS nongovernmental 

organization 

(specifics to be 

determined)

To be 

determined

$13,574,098

59 Democratic 

People's 

Republic of 

Korea

TB To be determined Global Fund 

secretariat

2,294,000

60 Indonesia HIV/AIDS Ministry of Health PWC Being 

negotiated

6,924,971

61 Indonesia Malaria Ministry of Health PWC Being 

negotiated

16,018,800

62 Mali Malaria Ministry of Health KPMG 2,023,424

63 Nigeria HIV/AIDS Yakubu Gown 

Center

KPMG Being 

negotiated

17,722,103

64 Nigeria HIV/AIDS Yakubu Gown 

Center

KPMG Being 

negotiated

8,708,684

65 Nigeria HIV/AIDS Yakubu Gown 

Center

KPMG Being 

negotiated

1,687,599

66 Thailand TB Ministry of Health PWC Being 

negotiated

6,999,350

67 Thailand HIV/AIDS Ministry of Health PWC Being 

negotiated

30,933,204

68 Vietnam HIV/AIDS Ministry of Health KPMG 7,500,00

69 Vietnam TB Ministry of Health KPMG 2,500,000

Total pending agreements as of April 22, 2003 $109,386,233

Total agreements (signed, in pipeline, and pending) as of April 22, 2003 $566,871,221
Page 54 GAO-03-601 Global Health

Appendix III

Drug Procurement Cycle ApendxiI

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. 
Appendix III

Drug Procurement Cycle

Page 55 GAO-03-601 Global Health

Note: the adaptation is from Managing Drug Supply, 2nd edition, revised and expanded, Hartford, CT, 

Kumarian Press, 1997.
Page 56 GAO-03-601 Global Health

Appendix IV

Indicators of Need for Recipient Countries ApendxiIV

Countrya

Diseases being 

addressed by 

Fund grants

Amount

requested by

approved grants

for full length of

programs

HIV/AIDS

rate (%),

Adults

(15-49)

Malaria

(Cases/

100,000)

TB (Cases/

100,000)

Human

Development

Indexb

Gross National

Income per capita

(in U.S. dollars)c

Low Income

Afghanistan HIV/AIDS, 

Malaria, TB

$3,125,605 NA 1,825 325 NA NA

Armenia HIV/AIDS 7,249,981 0.2 NA 58 76 $2,580

Bangladesh HIV/AIDS 19,961,030 <.1 47 241 145 1,590

Benin HIV/AIDS, TB, 

Malaria

23,803,254 3.6 11,845 266 158 980

Burkina Faso HIV/AIDS, 

Malaria

26,776,825 6.5 5,852 319 169 970

Burundi HIV/AIDS, 

Malaria

26,423,125 8.3 28,031 382 171 580

Cambodia HIV/AIDS, TB, 

Malaria

47,460,470 2.7 473 560 130 1,440

Central African 

Republic

HIV/AIDS 25,090,588 12.9 2,485 415 165 1,160

Chad TB 3,039,327 3.6 190 270 166 870

Comores Malaria 2,485,878 NA 2,286 NA 137 1,590

Congo, 

(Democratic 

Republic of)

TB 7,973,002 4.9 2,963 301 155 680

Cote d'Ivoire HIV/AIDS 91,203,150 9.7 6,874 375 156 1,500

East Timor Malaria 2,963,723 NA NA NA NA NA

Eritrea Malaria 7,911,425 2.8 7,405 272 157 960

Ethiopia HIV/AIDS, TB, 

Malaria

237,568,925 6.4 618 373 168 660

Georgia HIV/AIDS 12,125,644 <.1 NA 72 81 2,680

Ghana HIV/AIDS, TB, 

Malaria

29,214,210 3 8,874 281 129 1,910

Guinea HIV/AIDS, 

Malaria

22,029,110 NA 6,469 255 159 1,930

Haiti HIV/AIDS 66,905,477 6.1 12 361 146 1,470

India HIV/AIDS,TB 137,975,999 0.8 226 185 124 2,340

Indonesia HIV/AIDS, TB, 

Malaria

130,574,740 0.1 82 282 110 2,830
Appendix IV

Indicators of Need for Recipient Countries 

Page 57 GAO-03-601 Global Health

Kenya HIV/AIDS, TB, 

Malaria

176,745,326 15 1,000 417 134 1,010

Korea, 

(Democratic 

Republic of)

TB 4,891,000 NA 448 176 NA NA

Kyrgyz Republic HIV/AIDS, TB 19,844,373 <.1 NA 130 102 2,540

Lao People’s 

Democratic 

Republic

HIV/AIDS, TB, 

Malaria

19,507,845 <.1 755 171 143 1,540

Lesotho HIV/AIDS, TB 34,312,000 31 NA 542 132 2,590

Liberia HIV/AIDS, TB 12,192,274 NA 26,828 271 NA NA

Madagascar HIV/AIDS, 

Malaria

8,335,149 0.3 2,360 236 147 820

Malawi HIV/AIDS, 

Malaria

323,798,722 15 58,139 443 163 600

Mali Malaria 2,592,991 1.7 4,213 261 164 780

Mauritania TB, Malaria 5,627,299 NA 11,000 241 152 1,630

Moldova HIV/AIDS, TB 11,719,047 0.2 NA 130 105 2,230

Mongolia HIV/AIDS, TB 4,727,103 <.1 NA 205 113 1,760

Mozambique HIV/AIDS, TB, 

Malaria

155,735,362 13 4,120 407 170 800

Myanmar TB 17,121,370 NA 254 169 127 NA

Nepal HIV/AIDS, 

Malaria

18,840,210 0.5 39 209 142 1,370

Nicaragua HIV/AIDS, TB, 

Malaria

18,865,903 0.2 392 88 118 2,080

Nigeria HIV/AIDS, TB, 

Malaria

137,655,309 5.8 541 301 148 800

Pakistan HIV/AIDS, TB, 

Malaria

21,619,750 0.1 74 177 138 1,860

Rwanda HIV/AIDS, TB 14,641,046 8.9 13,237 381 162 930

Senegal HIV/AIDS, 

Malaria

18,857,142 0.5 553 258 154 1,480

Sierra Leone TB 5,698,557 7 9,318 274 173 480

Somalia Malaria 12,886,413 1 102 365 NA NA

Sudan TB, Malaria 76,319,734 2.6 13,553 195 139 1,520

Tajikistan HIV 2,425,245 <.1 295 105 112 1,090

(Continued From Previous Page)

Countrya

Diseases being 

addressed by 

Fund grants

Amount

requested by

approved grants

for full length of

programs

HIV/AIDS

rate (%),

Adults

(15-49)

Malaria

(Cases/

100,000)

TB (Cases/

100,000)

Human

Development

Indexb

Gross National

Income per capita

(in U.S. dollars)c
Appendix IV

Indicators of Need for Recipient Countries 

Page 58 GAO-03-601 Global Health

Tanzania HIV/AIDS, 

Malaria

28,683,718 7.8 1,293 340 151 520

Togo HIV/AIDS 19,882,903 6 8,512 313 141 1,410

Uganda HIV/AIDS, TB, 

Malaria

96,719,638 5 9,305 343 150 1,210

Ukraine HIV/AIDS 92,152,744 1 NA 73 80 3,700

Vietnam HIV/AIDS, TB 22,000,000 0.3 95 189 109 2,000

Yemen Malaria 11,878,206 0.1 15,202 NA 144 770

Zambia HIV/AIDS, TB, 

Malaria

191,967,000 21.5 26,260 495 153 750

Zimbabwe HIV/AIDS, 

Malaria

22,977,500 33.7 9,429 562 128 2,550

Lower middle income

Bulgaria HIV/AIDS 15,711,885 <.1 NA 46 62 5,560

China TB, Malaria 54,476,659 0.1 1 103 96 3,920

Cuba HIV/AIDS 26,152,827 <.1 NA 15 55 NA

Dominican 

Republic

HIV/AIDS 48,484,482 2.5 12 135 94 5,710

Ecuador HIV/AIDS 14,104,108 0.3 683 172 93 2,910

Egypt, (Arab 

Republic of)

TB 4,032,014 <.1 NA 39 115 3,670

El Salvador HIV/AIDS, TB 26,912,923 0.6 NA 67 104 4,410

Honduras ALL 41,119,903 1.6 547 92 116 2,400

Iran, (Islamic 

Republic of)

HIV/AIDS 15,922,855 <.1 33 54 98 5,910

Jordan HIV/AIDS 2,483,900 <.1 NA 11 99 3,950

Kazakhstan HIV/AIDS 22,360,000 0.1 NA 130 79 5,490

Morocco HIV/AIDS 9,238,754 0.1 NA 119 123 3,450

Namibia HIV/AIDS, TB, 

Malaria

113,157,021 22.5 2,556 490 122 6,410

Peru HIV/AIDS, TB 50,177,054 0.4 257 228 82 4,660

Philippines TB, Malaria 23,267,609 <.1 15 314 77 4,220

Romania HIV/AIDS, TB 48,360,586 <.1 NA 130 63 6,360

Serbia 

(Yugoslavia)

HIV 3,575,512 NA NA NA NA NA

South Africa HIV/AIDS, TB 190,388,018 20.1 83 495 107 9,160

(Continued From Previous Page)

Countrya

Diseases being 

addressed by 

Fund grants

Amount

requested by

approved grants

for full length of

programs

HIV/AIDS

rate (%),

Adults

(15-49)

Malaria

(Cases/

100,000)

TB (Cases/

100,000)

Human

Development

Indexb

Gross National

Income per capita

(in U.S. dollars)c
Appendix IV

Indicators of Need for Recipient Countries 

Page 59 GAO-03-601 Global Health

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.

Sri Lanka TB, Malaria 14,505,200 <.1 1,402 59 89 3,460

Swaziland HIV/AIDS, 

Malaria

56,736,900 33.4 300 564 125 4,600

Thailand HIV/AIDS, TB, 

Malaria

209,635,201 1.8 199 141 70 6,320

Upper middle income

Argentina HIV/AIDS 28,756,200 0.7 NA 55 34 12,050

Botswana HIV/AIDS 18,580,414 38.8 4,467 702 126 7,170

Chile HIV/AIDS 38,151,562 0.3 NA 26 38 9,100

Costa Rica HIV/AIDS 4,202,362 0.6 50 17 43 7,980

Croatia HIV/AIDS 4,945,192 <.1 NA 61 48 7,960

Estonia HIV/AIDS 10,246,580 1 NA 61 42 9,340

Panama TB 570,000 1.5 34 54 57 5,680

(Continued From Previous Page)

Countrya

Diseases being 

addressed by 

Fund grants

Amount

requested by

approved grants

for full length of

programs

HIV/AIDS

rate (%),

Adults

(15-49)

Malaria

(Cases/

100,000)

TB (Cases/

100,000)

Human

Development

Indexb

Gross National

Income per capita

(in U.S. dollars)c
Page 60 GAO-03-601 Global Health

Appendix V

Comments from the Global Fund to Fight 

AIDS, TB and Malaria ApendxiV
Appendix V

Comments from the Global Fund to Fight 

AIDS, TB and Malaria

Page 61 GAO-03-601 Global Health
Appendix V

Comments from the Global Fund to Fight 

AIDS, TB and Malaria

Page 62 GAO-03-601 Global Health
Appendix V

Comments from the Global Fund to Fight 

AIDS, TB and Malaria

Page 63 GAO-03-601 Global Health
Appendix V

Comments from the Global Fund to Fight 

AIDS, TB and Malaria

Page 64 GAO-03-601 Global Health
Appendix V

Comments from the Global Fund to Fight 

AIDS, TB and Malaria

Page 65 GAO-03-601 Global Health
Appendix V

Comments from the Global Fund to Fight 

AIDS, TB and Malaria

Page 66 GAO-03-601 Global Health
Page 67 GAO-03-601 Global Health

Appendix VI

Joint Comments from the Departments of 

Health and Human Services and State, and the 

U.S. Agency for International Development ApendxiVI
Appendix VI

Joint Comments from the Departments of 

Health and Human Services and State, and 

the U.S. Agency for International 

Development

Page 68 GAO-03-601 Global Health
Page 69 GAO-03-601 Global Health

Appendix VII

GAO Contact and Staff Acknowledgments ApendxiVI

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)
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