Global Health: The Global Fund to Fight AIDS, TB and Malaria Is Responding to Challenges but Needs Better Information and Documentation for Performance-Based Funding
Published: 2005-06-10T00:00:00

Fast Facts:

Highlights:
section_title: Why GAO Did This Study
paragraphs: The Global Fund to Fight AIDS, Tuberculosis and Malaria--established as a private foundation in January 2002--is intended to rapidly disburse grants to recipients, including governments and nongovernmental organizations. The Global Fund has signed over 270 grant agreements and disbursed more than $1 billion. Governments provide most of its funding; the United States has provided almost one-third of the $3.7 billion the Global Fund has received. In May 2003, the President signed legislation directing the Comptroller General to monitor and evaluate Global Fund-supported projects. GAO reviewed grants that the Global Fund began disbursing before January 2004. This report (1) describes the Global Fund's process for managing grants and disbursing funds, (2) identifies factors that have affected grant performance, (3) reviews the basis and documentation of performance-based funding, and (4) notes recent refinements of Global Fund processes.
section_title: What GAO Found
paragraphs: Global Fund policy is to manage grants in a transparent and accountable manner, disbursing funds to recipients based on their demonstrated performance as measured against agreed-on targets. In implementing this performance-based funding system, Global Fund officials are to periodically assess whether the grant's principal recipient has made sufficient progress to warrant its next disbursement. After 2 years, the Global Fund is to determine whether to continue funding the grant for an additional 3 years. In making an assessment, officials consider several information sources, including the recipient's reports on its performance and expenditures and an independent agent's verification of the recipient's reports. Recipient countries' capacity to implement grants has been an underlying factor in grant performance, according to Global Fund and other knowledgeable officials. These officials, as well as principal recipients, also cited guidance, coordination, planning, and contracting and procurement as factors associated with challenges or successes in grant performance. For example, recipients in three countries reported that they could not meet their targets because they had not received national treatment guidelines. However, several grant recipients reported that, under certain circumstances, Global Fund guidance allowed them to quickly redirect funds, thereby enabling them to meet their targets. GAO found problems associated with the information sources that the Global Fund uses in making performance-based funding decisions. For example, the limited monitoring and evaluation capabilities of many recipients raise questions about the accuracy of their reporting. Moreover, the Global Fund has not consistently documented its determinations that recipients' performance warranted additional funding. For instance, the Global Fund's documentation did not explain its decisions to disburse funds to some recipients who reported that they had met few targets. Further, the Global Fund does not track or publicly document denied disbursement requests. The Global Fund is taking steps to address challenges to grant performance and improve the overall management of grants, including (1) reorganizing and strengthening its staff; (2) developing a risk assessment mechanism and early warning system to identify poorly performing grants; (3) streamlining reporting and funding procedures; (4) working with partners to strengthen recipient capacity; and (5) clarifying certain guidance for the country coordinating mechanism--the entity in each country responsible for developing grant proposals, nominating grant recipients, monitoring grant implementation, and advising the Global Fund on the viability of grants for continued funding. However, the Global Fund has not clearly defined the role of these entities in overseeing grant implementation.

section_title: Letter
paragraphs: In January 2002, the Global Fund to Fight AIDS, Tuberculosis and Malaria  (the Global Fund) was established as a private foundation to increase  spending for the prevention and treatment of the three diseases. The Global  Fund is intended to rapidly disburse grants to recipients such as  governments and nongovernmental organizations, based on recipients’  performance against agreed-on targets; the Global Fund’s policy is to make  such disbursements in a transparent and accountable manner. The Global  Fund approved its first grants in April 2002; as of April 15, 2005, it had  signed 271 grant agreements with recipients in 123 countries and territories  and had disbursed more than $1 billion. The Global Fund is a public-private  partnership, governed by a board of directors representing governments,  nongovernmental organizations, private companies, and persons living  with the three diseases. The Global Fund receives most of its funding from  national governments; the United States has provided almost one-third of  the $3.7 billion that it has received, and the President’s 2006 budget  requests an additional $300 million.
In May 2003, we reported that the Global Fund had made progress in  establishing governance structures and had developed comprehensive  systems for monitoring grants but that the monitoring systems faced  challenges. Also in May 2003, the President signed legislation directing the  Comptroller General to monitor and evaluate projects supported by the  Global Fund. Since then, the Global Fund has continued to refine its  processes. This report reflects our review of grants that the Global Fund  began disbursing before the beginning of 2004—that is, grants that have  had at least 1 year in which to demonstrate performance. In this report, we  (1) describe the Global Fund’s process for managing grants and disbursing  funds; (2) identify factors that have affected grant performance; (3) review  the basis for, and documentation of, the Global Fund’s performance-based  funding; and (4) describe the Global Fund’s recent refinements for  managing grants and improving their performance.
To describe the Global Fund’s process for managing grants and disbursing  funds, we reviewed Global Fund documents and interviewed officials from  the Global Fund headquarters in Geneva, Switzerland. To identify factors  affecting grant performance, we reviewed principal recipients’ progress  reports for 38 grants that had a first disbursement on or before December  31, 2003—to allow for at least 1 year of performance—and met additional  criteria, and we categorized reasons given for deviation from performance  targets. Also, to determine whether certain grant characteristics were  factors associated with the percentage of funds disbursed for each grant,  we analyzed disbursement data for 130 grants that began disbursing funds  by the end of 2003. Further, we reviewed documents obtained from field  visits to four countries—Indonesia, Kenya, Thailand, and Zambia—and  interviewed a wide variety of government, civil society, and bilateral and  multilateral development officials in those countries who were involved in  grant implementation or oversight. In addition, we interviewed officials  from the Global Fund and multilateral technical assistance agencies. To  review the basis for, and documentation of, the Global Fund’s  performance-based funding, we examined Global Fund  documents—including its policy manual, recipients’ progress reports, and  documents assessing the eligibility of 25 of 28 grants considered by the  Global Fund as of the end of March 2005 for continued funding after an  initial 2 years—and spoke with Global Fund staff. To describe the Global  Fund’s recent refinements for managing grants and improving their  performance, we reviewed additional Global Fund documents and  conducted follow-up interviews with Global Fund and other officials. We  conducted our work from June 2004 through March 2005 in accordance  with generally accepted government auditing standards. (See app. I for  further details of our scope and methodology.)
subsections: section_title: Background
paragraphs: Human immunodeficiency virus/acquired immune deficiency syndrome  (HIV/AIDS), tuberculosis (TB), and malaria, are devastating millions of  individuals and families, thousands of communities, and dozens of nations  around the world according to the UN’s WHO.
HIV/AIDS, the retrovirus that causes AIDS, is usually transmitted (1)  sexually; (2) from mothers to children before or at birth or through  breastfeeding; or (3) through contact with contaminated blood, such as  through the use of contaminated hypodermic needles. In 2004, it led to  between 2.8 and 3.5 million deaths, most of them in sub-Saharan Africa,  which is home to more than 60 percent of people living with the virus.
The number of people infected with HIV has risen in every region of the  world, with the steepest increases occurring in East Asia, Eastern  Europe, and Central Asia. In China, HIV/AIDS is now found in all 31  provinces, autonomous regions, and municipalities; and in India, as of  2003, 2.5 to 8.5 million people had been infected. In Eastern Europe and  Central Asia, the number of HIV-positive people has risen ninefold in  less than 10 years.
TB, a bacterial infection transmitted by inhalation of airborne  organisms, ranks just behind HIV/AIDS as the leading infectious cause  of adult mortality, each year killing up to 2 million people, mostly  between the ages of 15 and 54 years. It is the most common killer of  people whose immune systems are compromised by HIV.
Malaria, caused by a parasite, is transmitted in human populations  through the bite of infected mosquitoes. The disease kills more than one  million people per year, mostly young African children.
The Global Fund, established as a private foundation in Switzerland in  2002, was created as a partnership between governments, civil society, the  private sector and affected communities to increase resources to fight the three diseases. As shown in table 1, 45 percent of the Global Fund’s 271  grants, as of April 15, 2005, were focused on HIV/AIDS; 45 percent went to  recipients in sub-Saharan Africa; and 59 percent went to government recipients.
In March 2005, the Global Fund reported that across all grants, it had  provided antiretroviral treatment to 130,000 people with AIDS;  tested more than one million people voluntarily for HIV;  supported 385,000 TB patients with directly observed short-course   given more than 300,000 people new, more effective treatments for  malaria; and  supplied more than 1.35 million families with insecticide-treated  mosquito nets.
The Global Fund’s key principles are to (1) operate as a financial  instrument, not an implementing entity; (2) make available and leverage  additional resources; (3) support programs that evolve from national plans  and priorities; (4) operate in a balanced manner with respect to geographic  regions, diseases, and health-care interventions; (5) pursue an integrated  and balanced approach to prevention, treatment, care and support; (6)  evaluate proposals through an independent review process; and (7) operate  in a transparent and accountable manner and employ a simplified, rapid,  and innovative grant-making process.
section_title: Grant Management Process Has Many Participants and Occurs in Two Phases
paragraphs: Numerous entities participate in the Global Fund’s processes for managing  grants. The Global Fund manages its grants in two phases, generally over a  5-year period. During phase 1, the Global Fund signs a 2-year grant  agreement with the principal recipient and periodically reviews recipients’  performance to determine whether to disburse additional funds. Near the  end of phase 1, the board reviews the grant’s progress to determine  whether to renew the grant for an additional 3 years; if the board approves  continued funding, the grant enters phase 2. The Global Fund board  approved the first round of grants in April 2002 and approved 33 grants to  enter phase 2 as of April 25, 2005.
subsections: section_title: Numerous Entities Are Involved in Managing Grants
paragraphs: The following entities participate in the Global Fund’s grant management  process (see fig. 1).
A country coordinating mechanism (CCM) representing country-level  stakeholders submits grant proposals to the Global Fund and nominates  a principal recipient to be responsible for implementing the grant.  According to the Global Fund, the CCM should be made up of high-level  host government representatives, representatives of nongovernmental  organizations (NGO), multilateral and bilateral donors, the private  sector, and individuals living with HIV/AIDS, TB, or malaria. CCMs are  to develop and forward grant proposals to the Global Fund, monitor  grant implementation, and advise the Global Fund on the viability of  grants for continued funding after 2 years.
The principal recipient is a local entity nominated by the CCM that  signs an agreement with the Global Fund to implement a grant in a  recipient country. There may be multiple public and private principal  recipients for a single grant. The principal recipient is responsible for  overseeing the activities of any subrecipients implementing grant  activities and for distributing grant money to them.
The secretariat is responsible for the Global Fund’s day-to-day  operations, including managing the grant proposal process; overseeing  and managing grant implementation to ensure financial and  programmatic accountability; and acting as a liaison between grant  recipients and bilateral, multilateral, and nongovernmental partners to  ensure that activities at the country level receive necessary technical  assistance and are well coordinated. As of April 15, 2005, the secretariat  had 165 staff. Within the secretariat, the fund portfolio manager, or  grant manager, is responsible for reviewing grant progress and deciding  whether to disburse additional funds to the principal recipient.
The secretariat reports to the Global Fund’s board of directors. The  23-member board is responsible for overall governance of the Global  Fund and approval of grants. The board includes 19 voting  representatives of donor and recipient governments, NGOs, the private  sector (including businesses and foundations), and affected  communities. Key international development partners, including WHO,  the Joint UN Programme on HIV/AIDS (UNAIDS), and the World Bank,  participate as nonvoting members. The World Bank also serves as the  Global Fund's trustee.
The local fund agent is the Global 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 Global Fund. To date,  the Global Fund has contracted with the following entities to serve as  local fund agents: four private firms, KPMG, PricewaterhouseCoopers  (PWC), Chemonics International, Inc., and Deloitte Emerging Markets;  one private foundation that was formerly a public corporation, Crown  Agents; the Swiss Tropical Institute; and two multilateral entities, the  World Bank and the UN Office for Project Services (UNOPS). PWC and  KPMG serve as the local fund agents in 91 of the 110 countries for which  the Global Fund has contracted local fund agents.
section_title: Global Fund Implements Grants in Two Phases
paragraphs: After the board approves a proposal submitted by a CCM and vetted by an  independent, multinational technical review panel, typically for a 5-year  grant, the secretariat signs a 2-year grant agreement with the principal  recipient. This initial 2-year period represents phase 1 of the grant; if the  board approves continued funding, the grant enters phase 2.
subsections: section_title: Phase 1
paragraphs: For grants approved in 2002 and 2003, the local fund agent conducted, or  contracted with other entities to conduct, assessments of the recipient’s  capacity to (1) manage, evaluate, and report on program activities; (2)  manage and account for funds, including disbursing to subrecipients; and  (3) procure goods and services and maintain a reliable supply of drugs and  other commodities. The local fund agent initially conducted these  assessments after the signing of the grant agreement but now conducts  them before the Global Fund signs an agreement with a principal recipient.  After the local fund agent determines that the results of its assessments are  satisfactory, the Global Fund instructs the World Bank to disburse the first  tranche of funds to the principal recipient.
According to its policy, the Global Fund disburses subsequent tranches  based on performance to ensure that investments are made where impact  in alleviating the burden of HIV/AIDS, TB, and malaria can be achieved.  During the grant period, the portfolio managers are to link disbursements  to periodic demonstrations of program progress and financial  accountability. The grant agreements initially specified that principal  recipients would report their progress and request additional  disbursements on a quarterly basis. In July 2004, the secretariat changed  the default reporting/disbursement request cycle to every 6 months. As of  April 15, 2005, about 20 percent of the Global Fund’s grants were on a  6-month schedule. According to the secretariat, some grant recipients may  choose to remain on a quarterly schedule or the secretariat may decide,  based on a grant’s risk profile, to disburse only one quarter at a time.
According to secretariat officials, grant managers use four sources of  information to determine whether to disburse additional funds to grant  recipients.
Recipient progress reports. Principal recipients submit progress reports  on meeting designated targets along with requests for further funding at  the end of each disbursement period. If program results or expenses  differ significantly from plans attached to the grant agreement, the  principal recipient is to explain the reasons for these deviations and may  also provide an overview of other program results achieved, potential  issues and lessons learned, as well as any planned changes in the  program and budget. The recipient forwards its progress report and  disbursement request to the Global Fund secretariat through the local  fund agent.
Recipient expenditure data. The progress reports contain cash-flow  information. Principal recipients are to outline expenditures for the  previous disbursement period, comparing amounts budgeted for grant  activities with amounts spent. Recipients are then to reconcile  expenditures and provide a current cash balance. Budgets may vary  from initial projections, owing to cost savings, additional expenditures,  or currency fluctuations.
Local fund agent assessments. The local fund agent reviews and  validates the information in the progress update, performs ad-hoc  verifications of program performance and financial accountability, and  advises the Global Fund on the next disbursement. Local fund agents  are to highlight achievements and potential problems to support their  advice and may identify performance gaps to be addressed.  Representatives of one local fund agent, which covers grants in 29  countries, said that they base their disbursement recommendations on  two considerations: (1) the Global Fund’s level of risk in making  additional disbursements to a recipient that uses funds ineffectively and  (2) the immediate effect of withholding disbursement on program  implementation, including the delivery of disease-mitigating services.  These representatives said that, overall, they strive to tie the progress  update to projected results in the grant agreement.
Contextual information. The secretariat also uses additional  information relevant to interpreting grant progress, such as news of civil  unrest, political disturbance, allegations of corruption, conflict, major  currency crisis, change of principal recipient, and natural disasters. A  secretariat official said that the secretariat did not document  requirements for such information for phase-1 decisions but did allow  grant managers to consider any information that would adversely affect  grant implementation in their decisions to disburse. This information is  typically obtained through informal communications with grant  recipients, bilateral and multilateral donors, or other development  partners, according to secretariat officials.
The principal recipient is to provide the CCM with copies of its  disbursement requests and progress reports, and CCM members may  comment on the progress of implementation based on their local  knowledge and experience, either through the local fund agent or directly  to the secretariat. If the secretariat decides to approve the disbursement  request, it may specify the level of disbursement and actions that the  principal recipient must take. The secretariat then instructs the World Bank  to make the disbursement. The secretariat may also decide not to approve  the disbursement request.
section_title: Phase 2
paragraphs: When a grant reaches its sixteenth month, the Global Fund invites the CCM  to submit a request for continued funding for the period following the  initial 2 years. The Global Fund refers to this period as phase 2 of the grant  (see fig. 2).
The CCM is to submit its request to the Global Fund by month 18, and the  secretariat is to evaluate the CCM’s request using the four sources of  information described earlier. Based on its assessment of this information,  as informed by its professional judgment, the secretariat gives the grant  one of four scores, as shown in figure 3. It then provides its assessment and  recommendation—called a grant scorecard—to the board regarding  approval of the request, and the board decides on the request by month 20.  If the board approves the request, the principal recipient and the Global  Fund negotiate and sign a grant agreement extension over the next 2  months. At month 22, the Global Fund instructs the World Bank to make  the first phase-2 disbursement.
The secretariat sends its recommended scores to the board members, who  vote on the recommendations via e-mail. A “go” decision means that the  Global Fund approves proceeding to phase 2. “Conditional go” means that  the Global Fund approves proceeding to phase 2 after the principal  recipient undertakes specific actions within the time frame specified.  “Revised go” means that the principal recipient must reprogram the grant  and substantially revise the targets and budgets for phase 2. “No go” means  that the Global Fund does not approve the grant’s proceeding to phase 2.  Currently, recipients denied further funding (“no go”) cannot formally  appeal the board’s decision. However, a board subcommittee may consider  a formal appeal process. If the “no go” decision affects patients on lifelong  treatment, the principal recipient may be eligible to receive funding to  sustain treatment for 2 more years.
As figure 4 shows, the Global Fund board approved the first round of grant  proposals in April 2002. The second, third, and fourth rounds were  approved in January 2003, October 2003, and June 2004, respectively. The  board is expected to approve a fifth round of proposals in September 2005.  As of April 25, 2005, the secretariat had reviewed 36 grants that became  eligible for continued funding under phase 2. The board approved 20  grants, conditionally approved 13, denied 1, and is still considering 2. The  board will continue to evaluate grants for phase 2 on a rolling basis as they  become eligible.
section_title: Several Factors Affected Grant Performance
paragraphs: According to Global Fund officials and other knowledgeable entities,  recipient countries’ capacity to implement grants was an underlying factor  in grant performance. In addition, principal recipients for the 38 grants as  well as Global Fund and development partner officials frequently cited four  factors associated with challenges or successes in grant performance: (1)  guidance, (2) coordination, (3) planning, and (4) contracting and  procurement. We found no significant association between the type of  principal recipient, grant size, or disease targeted and the percentage of a  grant’s funds disbursed to the principal recipient.
subsections: section_title: Limited Capacity in Recipient Countries Affected Performance, but Some Governments Have Strengthened Health-Sector Capacity
paragraphs: Global Fund and development partner officials cited limited capacity in  recipient countries as an underlying factor that can negatively affect grant  performance. Global Fund grant managers said that in many cases, grants  experienced early delays because of weaknesses in recipients’ financial,  procurement, and monitoring and evaluation systems. For example,  Indonesia’s local fund agent found the principal recipient’s management  and financial plans to be insufficient and asked the recipient to rework  them seven times before the local fund agent recommended grant  disbursements. Also in Indonesia, TB spending increased fivefold, greatly  straining capacity, particularly for monitoring and evaluating activities at  the district level. In Kenya, a lack of designated, adequately trained staff at  the principal recipient (the ministry of finance) and immediate  subrecipients (the ministry of health and the National AIDS Control  Council) slowed disbursements from the principal recipient and from the  immediate subrecipients to implementing organizations. Ethiopia has been  slow in implementing its first three grants, particularly those for TB and  malaria, owing to lack of monitoring and reporting capacity within the  ministry of health, delays in recruiting staff to manage financial systems,  slow decision-making processes, delays in starting the procurement  process, and cumbersome procurement procedures.
Despite limited overall capacity in recipient countries, we found instances  where recipient governments had worked with development partners to  strengthen capacity in the health sector, thus facilitating grant  performance. For example, according to the Indonesian government and  WHO officials, the Global Fund grant in Indonesia is building on a strong  foundation, using the country’s 5-year strategic plan for TB, a joint effort of  the Indonesian government and WHO. Between 2000 and 2003, the Dutch  government helped train TB “soldiers” in Indonesian provinces, which  improved outreach and case-detection efforts under the Global Fund grant;  Indonesia’s ministry of health had already established mechanisms to  quickly disburse funds to districts. In addition, the Zambian government  has worked with donors and other development partners to strengthen its  health sector financing mechanisms. As a result, donors, including the  Global Fund, contribute directly to an existing mechanism, the pooled  health sector “basket,” and use the health sector donor group overseeing  these funds to monitor and evaluate grant progress in meeting targets.
Zambia’s health sector also has mechanisms in place to quickly channel  funds to the country’s more than 70 districts. In Mongolia, the local fund  agent reported that the principal recipient and subrecipients had adequate  financial management systems in place to account for funds and that the  principal recipient could immediately start implementing the program with  little, if any, technical assistance. Some countries and grant recipients are  also seeking to strengthen their capacity through Global Fund grants,  according to the Global Fund and principal recipients.
section_title: Lack of Clear Guidance Impeded Performance, but in Some Cases Guidance Helped Recipients Meet Targets
paragraphs: Grant recipients frequently reported that a lack of guidance from the  recipient country’s government or the Global Fund caused them to fall  short of grant targets. For example, recipients in three countries reported  that they could not meet their targets because they had not received  approved national treatment guidelines. Indonesia’s ministry of health did  not have guidelines ready for the voluntary counseling and testing  component of its HIV grant, delaying distribution of information to the  provinces. Senegal’s ministry of health, another principal recipient, did not  have treatment plans needed for implementing its malaria grant, preventing  the principal recipient from receiving antimalarial medication. In addition,  some stakeholders reported that guidance from the Global Fund was  lacking or unclear or that they encountered difficulties with Global Fund  grant policies. For example, in at least one instance, U.S. government  officials reported that spending delays in Kenya resulted from unclear  guidance from the Global Fund regarding altering programs to allow the  use of newer, more effective but expensive malaria drugs. The Global Fund  recognized that procedures for early grants were unclear and that this lack  of clarity caused program delays. Further, WHO officials and at least one  recipient voiced concerns over lack of flexibility when recipients sought to  modify grant activities. For example, one subrecipient in Thailand  expressed concern that it could not use Global Fund money to build or  maintain a shelter for HIV-positive women because this type of activity was  not written into the grant. Grant recipients also said that continued staff  turnover in the Global Fund’s grant management teams made it difficult to  receive clear, consistent guidance. For example, recipients in Thailand said  that they had worked with four different grant managers over the life of  their grants and that this turnover had complicated communication.
However, several grant recipients reported that, under certain  circumstances, Global Fund guidance allowed them to quickly redirect  funds to meet existing targets. For example, the principal recipient in  Indonesia cited grant flexibility as a factor positively affecting performance  in both its TB and HIV/AIDS round-1 grants, because this flexibility allowed  it to adjust its funding priorities in line with its targets. Similarly, in  Thailand, one subrecipient stated that the Global Fund allowed it to change  training modules to meet educational needs, contributing to success.
section_title: Poor Coordination Slowed Grant Implementation, but Good Coordination Facilitated It
paragraphs: The Global Fund secretariat reported that, in some cases, poor  coordination negatively affected grant implementation. For example, in  Ghana, internal rivalries between ministry of health units with different  responsibilities in the program are slowing implementation. In Senegal, the  Global Fund reported that the principal recipient did not meet its target for  coordinating and developing partnerships to promote community-based  programs for combating malaria.
However, effective coordination between grant recipients and local  community groups or development partners sometimes contributed to  recipients’ meeting or exceeding their goals. Zambia’s HIV/AIDS grant  exceeded its targets for training and provision of services because of  development partner, NGO, and private sector contributions. Similarly, in  Kenya, one NGO principal recipient leveraged the activities of other groups  providing HIV care kits. Another recipient in Kenya exceeded its targets for  condom distribution by working with local intermediaries to increase  demand by approaching new types of clients, such as shoe shiners, open  vehicle cleaners, security officers, staff at petrol stations, and young men at  salons. In Indonesia, a grant subrecipient was able to provide treatment to  a larger number of TB patients by partnering with private physicians,  because a significant number of patients sought treatment at private  clinics.
section_title: Planning Difficulties Made It Hard to Meet Targets, but Adept Planning Made Them Attainable
paragraphs: Planning difficulties affected some recipients’ ability to meet grant targets.  Recipients reported that they sometimes did not achieve targets for a  variety of reasons, including not budgeting sufficient time or money to  complete targets, or scheduling activities for the wrong time period. One  recipient in Zambia underestimated the time needed to analyze baseline  data on constituent needs prior to the planned distribution of educational  materials on malaria prevention to 1,000 households. The recipient  eventually printed the materials but did not reach the targeted households  within the planned time frame. In Sri Lanka, a malaria grant recipient  underestimated the cost of establishing a community center and had to  redesign its program plan to remain within the grant budget. According to  the progress report, the principal recipient established new targets to use  the funds originally budgeted to build the center, delaying grant  implementation. Further, a recipient in Kenya did not conduct 3,000  planned community education skits aimed at preventing HIV during one  disbursement period and attributed the shortfall to a conflict with annual  school examinations. The Global Fund recognized that recipients’ difficulty  in setting targets for the initial grants derived in part from the fact that it  was developing procedures and guidelines at the same time that it was  approving and signing round-1 and round-2 grants.
Conversely, in some cases, adept planning positively affected grant  performance. In Indonesia, several grant recipients reported that effective  planning for TB treatment allowed various districts to complete work plans  early in the grant, in turn allowing the provinces that oversee those districts  to meet their target of developing budgets on time. In Haiti, one principal  recipient exceeded its targets by planning activities around World AIDS  Day, increasing the demand for, and the principal recipient’s provision of,  AIDS-related services such as condom distribution.
section_title: Delays in Contracting and Procurement Hindered Grant Performance, While Efficient Procurement Helped
paragraphs: Recipients frequently reported that contracting delays with subrecipients,  vendors, or other service providers caused them to miss quarterly targets.  For example, UNDP, a principal recipient in Haiti, was unable to hold a  planned HIV conference because of delays in signing a contract with a  subrecipient. Delays in selecting and reaching contracts with subrecipients  caused the Argentine grant to start slowly, the Global Fund secretariat  reported. In Thailand, the ministry of public health recipient could not  establish TB treatment services because of a subrecipient delay in selecting  a site and contract. Grant recipients and the Global Fund secretariat also  cited procurement delays as reasons for missing quarterly targets. For  example, recipients of malaria grants in Tanzania and Zambia reported that  they did not distribute the targeted number of bed nets due to lengthy  government procurement processes. In addition, during our visit to  Zambia, we found that local spending restrictions also affected recipients’  ability to meet and report on targets. A district health director explained  that spending restrictions delayed her purchase of a new hard drive for her  office’s computer, which slowed the district’s grant activities and reports to the principal recipient. In Kenya, we found that the limited capacity of the  Kenyan health ministry’s procurement agency and the ministry’s reluctance  to contract with outside procurement experts led to delays and, as a result,  to gaps in the supply of HIV test kits, which bilateral donors had to fill. In  Ghana, according to the Global Fund secretariat, the government’s slow,  bureaucratic procurement processes caused delays that contributed to the  grant’s poor performance in reaching people with HIV/AIDS and  opportunistic infections.
However, the Global Fund secretariat reported that some principal  recipients’ efficient procurement helped them meet their targets. For  example, a principal recipient in Madagascar managed procurement  exceptionally well throughout the grant and, as a result, exceeded its  targets for distributing bed nets. The Global Fund disbursed this grant’s  phase-2 funding early, because the recipient had implemented the program  rapidly and was therefore able to use the additional funds. Another  recipient in Madagascar consistently met targets, and its disbursements to  subrecipients accelerated. The Global Fund also reported that, after  initially strengthening its capacity, the principal recipient in Moldova made  substantial progress with procurement activities, thereby lowering  treatment costs per patient and realizing significant savings due to lower  acquisition costs.
section_title: No Significant Association Found between Grant Characteristics and Percentage of Funds Disbursed
paragraphs: To determine whether certain grant characteristics were factors associated  with the percentage of funds disbursed, we analyzed 130 grants with first  disbursements on or before December 31, 2003. We found no significant  association between the type of principal recipient, grant size, or disease  targeted and the percentage of a grant’s funds disbursed, after taking into account the time elapsed since the first disbursement. (See app. II for  details of our analysis.) For example, the Global Fund disbursed a smaller  percentage of grants to government recipients than to recipients in the  private sector and faith-based organizations, but these differences do not  incorporate other factors such as grant size or time elapsed since the first  disbursement. We also considered whether disbursements were made in a  timely manner, that is, within 135 days (a 90-day quarter plus a 45-day grace  period allowed by the Global Fund for reporting). Overall, we found that 35  percent of the disbursements were made within 135 days and that later  disbursements were more timely than earlier ones. The number of timely  disbursements was too small at any given disbursement stage to determine  whether timeliness varied according to recipient or disease type, or grant  size.
section_title: Sources Informing Funding Decisions Have Limitations, and Decisions Are Not Clearly Documented
paragraphs: We noted problems associated with the four information sources that the  secretariat draws on for periodic disbursement and renewal decisions. In  addition, although the Global Fund’s stated policy is to disburse funds  based on performance and to operate in a transparent and accountable  manner, we found that the secretariat did not document its reasons for  periodic disbursement decisions during phase 1. Similarly, some of the  secretariat’s recommendations regarding grant renewals for phase 2 have  not been fully documented, and stakeholders have raised additional  concerns regarding the timing of the phase-2 renewal process, dated  information, low grant expenditure, and potential politicization of  disbursement decisions.
subsections: section_title: Information Sources for Disbursement and Renewal Decisions Have Limitations
paragraphs: We found the following problems associated with the sources of  information that the secretariat uses in making periodic disbursement  decisions during phase 1 and determining whether to renew grants during  phase 2.
Recipient progress reports vary in quality. Some reports do not  explain why recipients missed targets, and the limited monitoring and  evaluation capabilities of many recipients raise questions about the  accuracy of their reporting. Secretariat officials acknowledged that  guidance for planning program activities, setting indicators, and  monitoring and evaluating progress was not available when initial grants  were signed. However, Global Fund secretariat and other officials have  raised questions about the ability of principal recipients to discharge  their responsibility for reviewing and monitoring the activities of  subrecipients to which they disburse funds. According to the Global  Fund official in charge of grant operations, many early grant proposals  were overly ambitious and hurriedly assembled; he said more recent  proposals were more realistic and better designed. UNAIDS officials  also stated that when principal recipients’ progress updates show poor  performance, it is not always clear whether grants are underperforming  or recipients are failing to effectively report performance. For example,  when a progress update shows failure to achieve targets, the principal  recipient and subrecipients may have actually completed the activities  but not understood how to record them.
Recipient expenditure data are incomplete. Recipients’ cash-flow  reports do not include data on expenditures below the level of the  principal recipient. In addition, principal recipients may not always  document their disbursal of money to subrecipients. Moreover, Global  Fund and other officials have questioned whether some principal  recipients have the expertise needed to monitor subrecipients’  expenditures. Further, secretariat officials stated that although the  achievement of program targets and cash flow are closely linked,  recipients’ expenditures do not necessarily indicate that they are  meeting their targets. The officials stated that utilizing this source of  information is essential to guard against treatment interruptions or  irreparable harm to struggling programs that are not yet viable but show  strong potential.
Local fund agent assessments are inconsistent. According to Global  Fund secretariat officials and others, the ability of local fund agents to  effectively verify program activities varies widely. A secretariat–  commissioned assessment reported that the current local fund agent  system does not provide grant managers with a sufficient level of risk assurance for continued funding. The study, as well as Global Fund and  development partner officials, reported that although most local fund  agents are competent to assess and verify financial accountability, they  often lack the knowledge and experience needed to assess and verify  recipients’ performance—specifically, recipients’ ability to meet  program targets, monitor and evaluate progress, and procure and  manage drugs and other medical supplies. The study also stated that  local fund agents’ assessments of financial and program-related capacity  and verifications of activities are limited and rarely include site visits to  implementing subrecipients.
Contextual information is systematically collected for phase 2 but not  for phase 1. To better understand why recipients received phase-1  disbursements when they did not meet many of their performance  targets, we requested full disbursement dossiers from the secretariat;  however, the dossiers contained very little contextual information  supporting the disbursement decisions. The contextual information  provided was often in the form of hand-written notes or e-mail  correspondence that had been collected ad hoc. Secretariat officials  acknowledged that while they collect contextual information through  detailed questions on the scorecards for phase-2 decisions, they have no  systematic method for collecting such information for phase-1  decisions. Although the Global Fund considers contextual information  in its funding decisions, it does not document the extent to which it uses  such information.
section_title: Little Documentation Provided to Support Phase 1 Disbursement Decisions
paragraphs: Although the files for the 38 grants we reviewed contained information on  progress toward targets and cash flow, they contained little or no  documentation explaining why the Global Fund approved the  disbursements. Overall, for the 38 grants we reviewed, we determined  that recipients met, on average, 50 percent of their targets; partially met 21 percent; and failed to meet 24 percent. For 6 percent of the targets, the  information in the progress reports was insufficient to determine whether  the target had been met, partially met, or not met. In some of these cases,  the Global Fund disbursed funds to recipients even though they reported  that they had met few or none of their targets. For example:   The principal recipient for Sri Lanka’s second malaria grant received  disbursements for its third and fourth quarters, although it had  submitted two progress updates showing that it met only 2 of its 14  targets for the third quarter and 4 of 13 targets for the fourth quarter.  The secretariat provided no written information explaining its approval  of the third-quarter disbursement and provided only a one-sentence  declaration of agreement regarding the fourth-quarter disbursement. In  both cases, the local fund agent had recommended that the recipient  receive less than the amount requested, citing cash-flow considerations  but not mentioning performance against targets. In each case, the  secretariat disbursed the amount that the local fund agent  recommended.
The principal recipient for Thailand’s TB grant received its second  disbursement although it had met only 1 of 29 performance targets. The  secretariat approved the full amount requested, stating that the recipient  had not requested sufficient funds in its previous disbursement request,  although the grant manager did not provide documentation to validate  this assessment. The local fund agent had noted the grant’s poor  performance and, acknowledging the grant’s low cash reserves,  suggested a disbursement of 25 percent of the recipient’s request.
Further, the Global Fund secretariat does not systematically track denied  disbursement requests or publicly document denials. Secretariat officials  acknowledged that they currently have no mechanism for tracking or  documenting these instances. According to these officials, the denial may  eventually be documented in a memorandum on the grant’s disbursement  request history once a disbursement is approved or, if the grant is  ultimately canceled without further disbursement, in a grant-closing  memorandum.
section_title: Some Renewal Recommendations Were Not Clearly Documented
paragraphs: According to grant management officials, the secretariat is to  unequivocally demonstrate satisfactory performance of all grants  recommended to the board for continued funding under phase 2. However,  we found that the secretariat did not always clearly explain the overall  score it assigned each grant when it recommended the grant for continued  or conditional funding. Although a substantial part of the score is to be  based on recipients’ performance against agreed-on targets (e.g., the  number of people to be reached by disease mitigation services), the final  score can also reflect grant managers’ professional judgment, contextual  information from multilateral and bilateral donors, and past disbursement  rate data. Secretariat officials said that decisions based on these  information sources should be documented when an overall score does not  seem to reflect recipients’ achievement of individual targets. However, we  did not find such documentation in the grant scorecards for 8 of 25 early  grants that the Global Fund has considered for continued funding after an  initial 2-year period. The secretariat gave 3 of the grants an overall score of  B2 yet recommended “conditional go,” which corresponds to a B1 score.  For another grant, the secretariat gave a B1 score for three indicators, two  of which concern the number of people reached by treatment, care, or  other disease mitigation services, yet made an overall recommendation of  “go,” which corresponds to an A score. Such discrepancies between scores  and recommendations are significant, because the recommendations  determine the levels of action that recipients are to undertake before  receiving phase-2 funding. Seven of the scorecards also raised concerns  about the quality of recipients’ data and their monitoring and evaluation  capabilities. Of the 25 grants, the Global Fund decided to cancel one, and  the secretariat’s scorecard clearly explained the reasons for recommending  that the board cancel the grant.
section_title: Stakeholders Also Raised Concerns Regarding Phase-2 Renewal Process
paragraphs: According to the Global Fund, the phase-2 renewal process is a critical  checkpoint to ensure that grants show results and financial accountability.  However, some stakeholders raised concerns about the process that the  Global Fund used to review the first set of grants eligible for renewal. For  example, a representative of a local fund agent stated that this process may  occur too early in the life of a grant and that progress may be better  evaluated when a grant approaches the 3-year mark. Further, officials  representing a Global Fund board member stated that data provided to the  board during the first round of renewal decisions did not contain  expenditure data. These officials stated that when they sought expenditure  data (i.e., amounts spent by grant recipients on program activities) on the  Global Fund’s Web site in March 2005, the most recent information for their  grants of concern had been posted in June 2004. Subsequent data  submitted to the board for phase-2 renewal decisions contained  expenditure information. In one case, a recipient applying for phase-2  funding and recommended by the secretariat for continued funding had  received more than 75 percent of its 2-year grant amount yet had  transferred only 12 percent of this money to subrecipients for program  activities. These officials also raised concerns over the potential for the  politicization of board decisions because the board had returned three “no  go” recommendations to the secretariat for further consideration after  some recipients and NGOs lobbied board members.
section_title: Global Fund Is Taking Several Steps to Refine Grant Management and Performance
paragraphs: The Global Fund’s secretariat is launching a range of initiatives to address  challenges to grant performance and improve the overall management of  grants. Systemwide, the secretariat is (1) reorganizing and strengthening its  units, (2) developing a risk assessment mechanism and early warning  system, (3) streamlining reporting and funding procedures, (4) working  with partners to strengthen recipient capacity, and (5) clarifying guidance  for CCMs. However, the board has not clearly defined the CCMs’ role in  overseeing grant implementation. The Global Fund has also responded to  country-specific challenges in Kenya and Ukraine.
subsections: section_title: Secretariat Is Reorganizing and Increasing Its Staff to Better Manage Grants
paragraphs: To improve grant management and documentation of funding decisions  and to better support underperforming grants, the Global Fund took the  following actions in 2004:  Reorganized the secretariat’s operations unit and increased the number  of staff from 118 to 165. For example, it added eight grant manager  positions and established regional teams, each with a team leader, so  that more than one grant manager is responsible for a set of grants in the  countries within a regional team. To better document periodic  disbursement decisions, the secretariat added a new position, known as  a program officer, to its grant management structure. The secretariat is  currently recruiting program officers for each regional team, who are to  be responsible for documenting disbursement and other decisions and  keeping track of grant milestones. Further, secretariat officials said that  the Global Fund is planning to recruit additional grant management staff  to conduct increased day-to-day recipient monitoring and assistance.  The program officers and the additional grant management staff  accounted for most of the increase in staff at the secretariat between  2004 and 2005, according to a Global Fund administrative official.
Created the Operational, Partnerships and Country Support Unit to  focus on problem grants. According to secretariat officials, this  unit—which also includes new positions to liaise with development and  technical assistance partners, local fund agents, and CCMs—will enable  the secretariat to address grant performance issues before they become  serious problems and will thereby better manage risk exposure. For  example, the unit could mobilize intervention by high-level recipient  government officials, solicit technical assistance from partners, or  engage the United Nations Children’s Fund (UNICEF) to procure health  commodities until the recipient government can set up a viable  procurement system.
Strengthened its strategic information and evaluation unit to improve  monitoring and evaluation, data reliability, and quality assurance.
To enhance the quality and consistency of the data that recipients  report, in June 2004 the secretariat issued a monitoring and  evaluation “toolkit” developed in cooperation with other donors and  development assistance partners. This toolkit guides grant  recipients to select consistent indicators to measure progress toward  key program goals, such as the number of people with AIDS who  were reached with drug treatment or the number of people given  insecticide-treated bed nets to prevent malaria. The secretariat has  also required attachments to each grant agreement that outline  program indicators and the specific activities that enable recipients  to meet these indicators and overall program goals. According to  Global Fund officials, progress will more easily and consistently be  measured when all grants have aligned their indicators and activities  to this toolkit. Grant managers are currently working to accomplish  this goal with the recipients they cover. According to the Global  Fund, these developments have been important in harmonizing  monitoring and evaluation approaches among partners at national  and international levels and will help simplify country-level reporting  to multiple donors by ensuring the use of a common set of indicators  to measure interventions. Partners provided training on the toolkit in  2004. According to the secretariat, training is to continue in 2005.  Recipients we met with in Thailand confirmed that they had received  the toolkit. However, they said that it was not in their native language  and therefore was not useful.
In March 2004, the board approved establishing a Technical  Evaluation Review Group with members from UNAIDS, WHO, and  other partners to develop a system for assessing and ensuring data  reliability. The group first met in September 2004. According to  Global Fund officials, these efforts will result in more systematic  reporting and analysis by recipients, the Global Fund, and partners  and, consequently, in better comparisons of grants.
To strengthen strategic information for monitoring grant  performance, in fall 2004, the secretariat created a “data warehouse”  that contains information from recipients’ progress reports and  disbursement requests, donors, CCMs, and local fund agent  assessments. Secretariat staff use the database to prepare  “scorecards” that rank grants for the phase-2 renewal process.
section_title: Secretariat Is Implementing a Risk Assessment and Early Warning System to Identify Potential Nonperforming Grants
paragraphs: The secretariat has devised a risk-assessment model and early warning  system to identify poorly performing grants and to more systematically  alert grant managers when they need to intervene. Because the Global  Fund disburses grants to recipients in countries with varying levels of  economic development and capacity, its risk-assessment model will  incorporate grant size and performance as well as country development  and corruption indicators. By tracking key events in the context of grant  and country risk, the grant portfolio managers can determine whether  recipients have missed important milestones. The early warning system is  to generate reports using indicators—for example, time elapsed between  disbursements—to flag problems and trigger possible interventions. The  system will also incorporate contextual information from country-based  partners. When the system identifies slow-moving grants, staff from the  secretariat’s Operational, Partnerships and Country Support unit will be  able to assess and follow up with the appropriate level of intervention. For  example, if a grant recipient in a high-risk country does not submit a  progress report and disbursement request at the expected time, the system  will alert staff that follow-up is needed.
Although the system has not been fully implemented, secretariat officials  said that their recent intervention in Tanzania exemplifies the way the  system should work. The Tanzania malaria grant was not demonstrating  progress after 1 year, as measured by the amount of funds disbursed  compared with the amount that the secretariat expected to disburse. After  following up with the principal recipient, secretariat staff realized that  political infighting—rather than technical limitations—were inhibiting  progress of the malaria program: competing groups were vying for control  of grant funds and uncertain of how to procure and distribute bed nets to  vulnerable groups, such as pregnant women or women with young  children. The government decided to give vouchers to members of  vulnerable groups to enable them to purchase bed nets at a lower price;  however, the ministry of health did not print or distribute the vouchers or  specify where they should be distributed. The Director of the Operational,  Partnerships and Country Support Unit traveled to Tanzania and met with  development partners and high-ranking host government officials to  encourage the government to take action. The Global Fund brought in  UNICEF, a key development partner in Tanzania, to work with the  government’s malaria advisor as well as experts from the Swiss Tropical  Medicine Institute to resolve the problems and get the program back on  track.
section_title: Secretariat Is Streamlining Procedures
paragraphs: In response to concerns that grantee reporting requirements are difficult  and time consuming for recipients, grant managers, and local fund agents,  the secretariat instituted a new policy that changes the default for reporting  from quarterly to every 6 months. In addition, the secretariat is considering  new, more streamlined funding mechanisms than the current round-based  approach. However, the board has not endorsed these changes, and some  board members, including the United States, are opposed to them at this  time.
To decrease the administrative burden on grantees and to bring its practice  more in line with other donor agencies, the secretariat instituted a  semiannual reporting policy in July 2004. Some recipients still report  quarterly, such as those implementing grants that the secretariat identified  as high risk—for example, in countries with limited human resource  capacity—while others have the option of using quarterly disbursements to  meet their needs—for example, as a hedge against currency fluctuations.  However, this policy change did not require board approval, and some  board members, including the United States, do not support it.
Although the Global Fund strives to be a funding mechanism that  seamlessly fits into many country programs by providing additional funding  where needed, it recognizes that its current practice of financing grants  through rounds can disrupt countries’ planning and time lines and strains  recipient capacity. In addition, some associated with the Global Fund said  that rounds might lead CCMs and recipients to concentrate their energy on  developing new proposals rather than implementing existing grants and  that repeated rounds add greatly to the secretariat’s workload. A document  submitted to the board by the secretariat stated that although the round-  based grant approval system worked well for launching the Global Fund and identifying countries that submitted strong proposals, this system  forced recipients to adapt their planning cycles to those of the Global Fund  (rather than building on preexisting planning cycles), encouraged the  submission of smaller proposals, and left a considerable amount of time  between proposal submission and approval. This document presented  several options for the board, such as creating two continuous funding  streams—one for governments and another for civil society recipients. For  example, government applicants could submit their national strategic plans  for the coming years, highlighting financing gaps and facilitating  integration of Global Fund financing with existing planning and budgeting  systems, such as sectorwide approaches. According to the document, this  approach would create incentives for CCMs to improve and accelerate the  disbursement of funds and would ease the secretariat’s workload, allowing  secretariat staff to spend more time managing grants and less time  negotiating grant agreements. The board has not set time frames for further  discussing this issue. According to U.S. board members, the board has not  yet fully discussed or approved these changes, and a majority of board  members oppose them at this time.
section_title: Global Fund Is Working with Partners to Improve Technical Capacity at the Country Level
paragraphs: Because most grant performance problems are associated with limited  capacity at the country level, where the Global Fund has no presence and  plays no part in program implementation, the Global Fund relies on its  technical partners to provide technical expertise to grant recipients.  Although the partners we spoke with expressed their strong support for the  Global Fund, they also voiced concern that they have not received additional resources to provide the technical support that grant recipients  have requested.
The Global Fund and partners reported that partners provided essential  support that strengthened recipients’ capacity to prepare applications for  Global Fund financing and helped address the underlying problems that  affected grant performance. For example:   UNAIDS, a key technical partner, has added about 30 monitoring and  evaluation officers in various countries who are available to support  CCMs in preparing grant performance reports for phase-2 renewals.  UNAIDS has also intensified its capacity-building support at the country  level.
Several WHO departments have provided critical technical support. For  example, WHO’s Stop TB unit supported 50 countries when they  developed their applications for Global Fund financing. The Global TB  Drug Facility worked with recipients in eight countries to identify and  resolve procurement and supply management bottlenecks. WHO’s  HIV/AIDS Department helped to develop comprehensive technical  support plans for accelerating the scale-up of antiretroviral therapy and  prevention services in 15 to 20 countries. In addition, according to the  Global Fund, it collaborated closely with WHO’s Roll Back Malaria  Department in 2004 to incorporate into existing grants new, more  effective malaria treatments that use artemisinin-based combination  therapy.
USAID and the U.S. Centers for Disease Control and Prevention  (HHS/CDC) are assisting grantees in a number of countries. For  example, USAID is supporting TB grants in numerous ways, including  providing training on procuring and managing medical supplies,  addressing country-level financial management constraints, and  conducting human resource assessments to determine existing capacity  needs. In another instance, HHS/CDC is assisting one grantee in  reporting and monitoring activities and revising project funds to  improve grant implementation. HHS/CDC has also coordinated the  implementation and monitoring of activities under another country’s TB  grant, participating in supervisory visits to districts to assess their  progress and compiling and submitting quarterly reports for the TB  grant to the ministry of health.
UNAIDS and WHO officials in Geneva and in the field expressed strong  support for the Global Fund but consistently raised concerns about their  organizations’ ability to respond to increasing numbers of requests from  grant recipients for help in addressing issues underlying performance  problems. For example, although UNAIDS recently added about 30  monitoring and evaluation officers in its country and regional offices,  officials said that the agency’s resources are being stretched thin and that it  cannot provide assistance to all Global Fund grant recipients. Likewise,  WHO officials said that its regional and country staff are dedicated to  providing technical assistance, but because WHO is not funded to support  Global Fund grants it is often unable to respond to all recipients’ requests  for help. According to officials from WHO’s HIV/AIDS, Stop TB, and Roll  Back Malaria departments, the Global Fund works under the assumption  that UN agencies have a mandate to provide technical assistance. However,  unless it gets more money from its member countries for this purpose,  WHO does not have the resources to keep up with the massive increase in  need for technical assistance owing to Global Fund grants. In addition,  WHO officials pointed out that the Global Fund does not encourage  recipients in African countries to take advantage of WHO’s Global Drug  Facility to procure quality-assured TB drugs at the cheapest prices  available; instead, the Global Fund encourages competition and reliance on  local industry.
section_title: Global Fund Has Clarified Guidance and Taken Steps to Strengthen CCMs, but Some Issues Remain
paragraphs: To strengthen accountability in recipient countries, the board has clarified  some roles and responsibilities for the CCMs. The board has stated that  CCMs are responsible for overseeing grant implementation and are  therefore to play an important role in deciding whether grants should be  renewed for phase-2 funding. To enhance and clarify CCM functioning, the  secretariat in March 2005, convened regional workshops in Zambia and  India on CCM best practices. In addition, to improve communication  between the Global Fund and CCMs, the secretariat is compiling contact  information for all CCM members. This information will enable it to  communicate directly with the members instead of relying on the CCM  chairperson to disseminate information. Secretariat officials acknowledged  that no formal studies conclusively demonstrate a link between CCM  functioning and grant performance. However, the Global Fund’s March  2005 report stated that many of the (then) 27 grants eligible for phase-2  funding benefited from several factors, including full levels of participation  by CCM members in that body. Further, the report stated that low levels of  participation and involvement by CCM members were a key factor in poor  performance. Secretariat officials stated that they plan to initiate a study  at the end of 2005 to systematically investigate links between CCM  functioning and grant performance, given that a number of additional  grants will then have neared the 2-year mark and gone through the phase-2  decision process.
In response to findings from several earlier studies commissioned by the  Global Fund on CCM functioning, in November 2004, the board agreed on  specific requirements for CCMs. However, it has not clearly defined  CCMs’ role in monitoring grant implementation. In April 2005, the board  directed CCMs to develop tools and procedures for overseeing grants,  stating generally that these tools and procedures “should include but need  not be limited to” a list of five activities such as recording key oversight  actions and developing a work plan that “could include” site visits. The  board noted that because CCMs vary from country to country, these  guidelines can be adapted and their application paced as needed.  According to secretariat staff, the board has not reached consensus  regarding CCMs’ oversight role because some members want clear, specific  requirements for CCMs while others prefer the more general guidelines. In  addition, in 2004, the board agreed on a checklist for measuring CCM  performance that focuses mostly on the makeup of the CCMs, participation  and communication among members, and governance and management.  However, the checklist did not include parameters for measuring the  effectiveness of CCMs in overseeing grant performance. Participants at the  Zambia workshop recommended that the secretariat develop more specific  guidelines defining the oversight role of the CCM.
section_title: Global Fund Intervened in at Least Two Countries to Address Grant Performance
paragraphs: The Global Fund secretariat intervened in at least two countries in  response to grant performance problems. For example, in Kenya, the  secretariat intervened in 2004 at the request of donors and board members  to encourage the principal recipient to hold regular meetings with  subrecipients and designate staff to administer and monitor the grants. The  secretariat also intervened in Kenya to improve coordination by facilitating  new CCM procedures, such as designating multiple minute-takers to ensure  the accuracy of the minutes and making sure that minutes are circulated  promptly. According to one CCM member, two additional people now take  notes at each meeting; however, the minutes are not being circulated in  advance of the next meeting. In commenting on a draft of this report, U.S.  government officials said that, despite these interventions, problems  persist. For example, they said that CCM meetings in Kenya are too  infrequent and poorly prepared; decisions are made outside of the  meetings; and the minutes are often inaccurate.
In Ukraine, the Global Fund suspended three HIV/AIDS grants in January  2004 after investigating irregularities in the principal recipients’  procurements that development partners had brought to its attention a  month earlier. The secretariat had also found that after nearly 12 months of  a 24-month program, the recipients had spent less than 4 percent of the  total 2-year amount for the three grants. The Global Fund had disbursed a  total of $7.1 million to the principal recipients, from whom it obtained $6.3  million in reimbursements. In March 2004, the secretariat signed an  agreement with a new principal recipient to continue the HIV/AIDS  mitigation activities specified in the original grants; in addition, it  transferred $300,000 to this entity to avoid interrupting ongoing programs.
section_title: Conclusions
paragraphs: The Global Fund’s mandate reflects inherent tensions. On the one hand, the  Global Fund is to function solely as a funding entity with no implementing  role and to encourage recipient country bodies such as the CCM to be  responsible for implementing and overseeing grants. On the other hand, it  is to disburse funds rapidly while also ensuring that recipients are able to  account for expenditures and produce measurable results in addressing the  three diseases.
In seeking to balance these tensions and further improve its performance,  the Global Fund has revised—and continues to revise—its processes. Some  systemwide changes require board approval or will take time to fully  implement, whereas others can be implemented relatively quickly. Capacity  in recipient countries, guidance, coordination, planning, and contracting  and procurement are pivotal to grant performance and therefore merit  continued attention. However, local fund agents’ frequent lack of expertise  in assessing these factors, and many recipients’ limited monitoring and  evaluation capabilities, raise questions about the accuracy and  completeness of the information that the secretariat uses to make its  periodic disbursement and funding renewal decisions. In addition, despite  recent improvements, the Global Fund’s lack of consistent, clear, and  convincing documentation of its funding decisions may hamper its ability  to justify these decisions to donors and other stakeholders, in accordance  with its principles of transparency and accountability. To ensure that all  funding decisions are clearly based on grant performance and reliable data,  it is critical that the Global Fund resolve these issues in a timely manner.
section_title: Recommendations for Executive Action
paragraphs: To improve the quality of the information on which the Global Fund bases  its funding decisions and the documentation explaining these decisions, we  recommend that the U.S. Global AIDS Coordinator work with the Global  Fund’s Board Chair and Executive Director to take the following three  actions:  complete efforts to ensure that local fund agents have the necessary  expertise to evaluate performance data on disease mitigation that  recipients submit,   continue to work with development partners to strengthen the quality  and consistency of that data by enhancing recipients’ capacity for  monitoring and evaluating their financial and program-related activities,  and   continue efforts to clearly document the Global Fund’s reasons for  periodically disbursing funds and renewing grant agreements.
section_title: Agency Comments and Our Evaluation
paragraphs: We requested comments on a draft of this report from the Executive  Director of the Global Fund, the Secretaries of State and HHS, and the  Administrator of USAID, or their designees. We received formal comments  from the Global Fund as well as a combined formal response from State,  HHS, and USAID (see apps. III and IV). The Global Fund concurred with  the report’s conclusion and recommendations and noted steps it is taking  to improve documentation of grant performance such as organizing  regional training of principal recipient staff to improve the quality of their  reporting; defining universal and detailed performance indicators for each  grant to more systematically track performance; and tailoring grant  oversight and terms of reference for local fund agents based on grant risk.  State, HHS, and USAID largely concurred with the report’s conclusions but  did not comment on the recommendations in their formal response. Both  the Global Fund and the U.S. agencies also submitted informal, technical  comments, which we have incorporated into the report as appropriate.
We are sending copies of this report to the Global Fund Executive Director,  the U.S. Global AIDS Coordinator, the Secretary of HHS, 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. Contact points for our Offices of Congressional Relations  and Public Affairs may be found on the last page of this report. GAO staff  who made major contributions to this report are listed in appendix V.
section_title: Objectives, Scope, and Methodology
paragraphs: In May 2003, the President signed a law directing the Comptroller General  to monitor and evaluate projects supported by the Global Fund. This  report reflects our review of grants that the Global Fund began disbursing  before the beginning of 2004—that is, grants that have had at least 1 year to  perform. In this report, we (1) describe the Global Fund’s process for  managing grants and disbursing funds, (2) identify factors that have  affected grant performance, (3) review the basis for, and documentation of,  the Global Fund’s performance-based funding, and (4) describe the Global  Fund’s recent refinements for managing grants and improving their  performance.
subsections: section_title: Methodology for Describing the Global Fund’s Process for Managing Grants and Disbursing Funds
paragraphs: To describe the Global Fund’s process for managing grants and disbursing  funds, we reviewed Global Fund documents, including The Global Fund  Operational Policy Manual and related guidance documents; A Force for  Change: The Global Fund at 30 Months; The Global Fund to Fight AIDS,  Tuberculosis and Malaria: Annual Report 2002/2003; and Investing in  the Future: The Global Fund at Three Years. We also interviewed Global  Fund officials in Washington, D.C., and in Geneva, Switzerland.
section_title: Methodology for Identifying Factors That Affected Grant Performance
paragraphs: To identify factors affecting grant performance, we conducted three types  of analysis. First, we selected 13 countries that had grants with a first  disbursement on or before December 31, 2003, to allow for at least 1 year of  performance, and that had grants covering more than one principal  recipient. In addition, all but 4 of these countries had grants covering more  than one disease. We reviewed Global Fund dossiers for 38 grants to  recipients in these countries and categorized reasons given for deviation  from performance targets. (Our initial scope included the 45 grants to these  countries, but for 7 of the grants there were no disbursement requests  available during the period of our review.) We found 75 progress  reports/disbursement requests and 51 local fund agent assessments  associated with 24 of the 38 grants. These 38 grants represent 29 percent of  the 130 grants that had received a first disbursement by the end of 2003.
Starting with the grant’s second disbursement, we included all  disbursement requests from each grant that were available on the Global  Fund Web site as of November, 2005, and a few that we received  subsequently from the Global Fund. We requested full disbursement  dossiers from the Global Fund. These dossiers contained principal  recipients’ progress reports and cash-flow/expenditure data, local fund  agents’ reviews of the recipients’ information and recommendations about  further disbursements, and, in most cases, additional documents such as  correspondence between the Global Fund secretariat and the principal  recipient. Using this information, we coded reasons given for deviation  from grantees’ agreed-upon performance targets into 1 of about 30  categories. We grouped this information into 5 major categories— resources or capacity; coordination; programmatic problems, needs, or  changes; procurement; and factors beyond recipients’ control. Within these  categories, we developed specific subcategories such as guidance,  decisions or plans not made, done, or available; signing of contracts or  agreements delayed or not done; and limited trained human resources.
As in any exercise of this type, the categories developed can vary when  produced by different analysts. To address this issue, two GAO analysts  reviewed a sample of the progress reports and independently proposed  categories, separately identifying major factors and then agreeing on a  common set of subcategories. We refined these subcategories during the  coding exercise that followed. We then analyzed the reasons for deviations  from all of the recipients’ progress reports and placed them into one of the  subcategories. When information in the progress reports was insufficient to  determine how to code a reason, we consulted the local fund agents’  reports. We tallied the counts in each subcategory and identified the  subcategories mentioned in the greatest number of grants.
The information in the disbursement requests varied in detail and quality.  The two analysts, together with a methodologist, therefore discussed and  documented categorization criteria and procedures throughout the  analysis, and the methodologist reviewed the entire analysis as a final step.  As a validity check on our document analysis and to identify frequently  cited factors that affected grant performance, we compared the  information in the subcategories mentioned in the most grants to  information available from our fieldwork (see below) and determined that  both sources of information reported similar findings.
In addition, we reviewed the 75 progress reports/disbursement requests  associated with these 38 grants and tallied the total number of targets in  each request. We ranked each target using the same numeric rating system the Global Fund uses for phase 2 (see fig. 3). Because many of the total  1,125 targets were nonnumeric (e.g., developing a monitoring and  evaluation plan), we did the following: (1) if the principal recipient clearly  met the target, we ranked the target as met (“meeting or exceeding  expectations”) and included it with the numeric targets that fell into that  category; (2) if the principal recipient clearly showed no progress toward  meeting the target, we ranked it as not met (“unacceptable”) and included  it with the numeric targets in that category; and (3) if the principal recipient  partially met the target, we gave it a separate ranking—“partially met  nonnumeric target,” and characterized it as partially met, along with the  partially met numeric targets. To arrive at percentages for the targets in  each category, we first calculated the percentage for each progress  report/disbursement request and then averaged the percentages for the  category from all the reports. Because the number of targets in each report  varied greatly, we averaged the percentages rather than the numbers of  targets to ensure that each report was given equal weight. We excluded  from our calculations those few targets for which the information available  was not adequate to determine whether or to what extent the target was  met.
Second, we reviewed documents obtained from field visits to four  countries—Indonesia, Kenya, Thailand, and Zambia—and interviewed a  wide variety of government, civil society, and bilateral and multilateral  development officials in these countries involved in grant implementation  or oversight. All four of these countries received more than $36 million in  committed funds for several grants that covered more than one disease,  and three of them (Kenya, Thailand, and Zambia) also have grants that  cover both government and civil society recipients. In addition, we  interviewed officials from the Global Fund, World Health Organization  (WHO), and the Joint UN Programme on HIV/AIDS (UNAIDS) in  Washington, D.C., and Geneva, Switzerland.
Finally, to determine whether the percentage of funds disbursed for each  grant (after the first disbursement) and the timeliness of the disbursements  were associated with grant characteristics such as type of principal  recipient, grant size, or disease targeted, we analyzed 130 grants with first  disbursements on or before December 31, 2003. (See app. II for a more  detailed discussion of this methodology.) To assess the reliability of the  Global Fund’s data, we (1) posed a set of standard data reliability questions  to knowledgeable agency officials, (2) performed basic electronic  reasonableness tests, and (3) interviewed officials about a few small  anomalies that we found during our analysis. We found only one minor  limitation, namely that disbursement dates were not reported for less than  5 percent of the disbursements. Based on our assessment, we determined  that the data were sufficiently reliable to generate descriptive statistics  about the program, and to be used for advanced statistical modeling work.
section_title: Methodology for Reviewing the Basis for, and Documentation of, the Global Fund’s Performance- Based Funding
paragraphs: To review the basis for, and documentation of, the Global Fund’s  performance-based funding, we examined Global Fund documents— including The Global Fund Operational Policy Manual and related  guidance documents, the dossiers for the 38 grants that had a first  disbursement on or before December 31, 2003, and documents supporting  Global Fund decisions to continue or discontinue funding 25 of 28 grants  that had reached their phase-2 renewal point and been reviewed by the  secretariat as of March 31, 2005. We also analyzed local fund agents’  assessments to determine how often grant managers documented  disbursement decisions. In addition, we interviewed Global Fund officials  in Washington, D.C., and in Geneva, Switzerland, and officials from the  Departments of State and Health and Human Services (HHS), and the U.S.  Agency for International Development (USAID).
section_title: Methodology for Describing the Global Fund’s Recent Refinements for Managing Grants and Improving Their Performance
paragraphs: To describe the Global Fund’s recent refinements for managing grants and  improving their performance, we reviewed Global Fund documents  including The Global Fund Operational Policy Manual and related  guidance documents and organization charts, and job descriptions for the  positions of local fund agent officer, country coordinating mechanism  (CCM) coordinator, program officer, and fund portfolio manager (grant  manager). We also examined Global Fund papers, including the Discussion  Paper on the Core Business Model for a Mature Global Fund; Update on  New Measures of Performance and Early Warning System; Update on the  Global Fund Information Management Platform; Revised Guidelines on  the Purpose, Structure and Composition of Country Coordinating  Mechanisms and Requirements for Grant Eligibility; and Performance  Standards and Indicators for CCM Monitoring. In addition, we reviewed  the report Investing in the Future: The Global Fund at Three Years and  the Monitoring and Evaluation Toolkit for HIV/AIDS, Tuberculosis, and  Malaria. We also reviewed documents from a March 2005 CCM workshop  conducted in Zambia. Further, we reviewed documents obtained during  fieldwork in Kenya, conducted follow-up correspondence with CCM  members in Kenya, and reviewed Global Fund documents concerning  grants to Ukraine. Additionally, we interviewed officials from the Global  Fund, the Departments of State and HHS, USAID, UNAIDS, and WHO.
We conducted our work from June 2004 through March 2005, in accordance  with generally accepted government auditing standards.
section_title: Methodologies Used to Compare Grants’ Disbursements
paragraphs: This appendix provides descriptive information related to the 130 grants  that had received their first disbursements from the Global Fund on or  before December 31, 2003, and the results of analyses we undertook to  determine whether some types of grants had disbursed a larger percentage  of their 2-year funds than others and to estimate the number of  disbursements that were made in a timely fashion. Disbursements refer to  those from the Global Fund to the principal recipient, not from the  principal recipient to subrecipients. Data were current as of February 4,  2005.
subsections: section_title: Grant Characteristics
paragraphs: Table 2 shows selected characteristics of the 130 grants we reviewed.
section_title: No Significant Differences between Grant Type and Percentage of Grant Disbursed
paragraphs: Table 3 shows the performance of different grant types with respect to  receiving disbursements. Some of these characteristics varied by type of  grant, although many of the differences were not significant.
Ministries of finance, on average, made a smaller number of disbursements  and disbursed a lower percentage of their grants, although they also had  made their first disbursements later and therefore had less time to make  disbursements. Similarly, larger grants disbursed lower percentages of  their grant amounts than smaller grants; but again, differences in the time  elapsed make it difficult to know whether these differences reflect  anything more than the time they had to make disbursements. Differences  in disbursements, percentages disbursed, and average days since the first  disbursement were insignificant across grants dedicated to the different  types of diseases.
section_title: Methodologies Used
paragraphs: To determine whether the differences in the percentage disbursed varied  by type of grant, we used ordinary regression techniques. The Global Fund  also analyzed grant disbursements, reporting in March 2005 that  disbursements are indicative of performance. Our analysis differed from  the Global Fund’s in that we looked at the percentage of the 2-year grant  amount disbursed since the first disbursement, whereas the Global Fund  looked at the percentage that was disbursed relative to the percentage that  was expected to be disbursed since the first disbursement. Because the  actual effect of time turns out to be nonlinear—meaning that although time  elapsed since the first disbursement has a significant effect on the  percentage disbursed, that effect decreases over time—we estimated the  effect of time directly before estimating differences in the percentage  disbursed across different types of grants.
We fit bivariate regression models (models 1-4 in table 4) to estimate and  test the significance of the gross effects of time since first disbursement,  principal recipient type, disease type, and grant size (or the effects of each  of these factors, ignoring all others) and a multivariate regression model  (model 5) to estimate the net effects of each (or the effects of each after  controlling for the effects of the others). Table 4 shows these results.
Model 1 in table 4 shows the effect that time, or days between the first  disbursement and February 2, 2005, has on the percentage of the grant  disbursed. The significant time-squared term indicates that the effect of  time is nonlinear. This nonlinearity makes the interpretation of the time  coefficients somewhat less straightforward, but the positive time  coefficients in table 4 indicate, not surprisingly, that grants that have had  more time to make disbursements have disbursed a larger percentage of  the 2-year grant amount remaining after the first disbursement. The  negative coefficients associated with the squared term means that over  time, time is less of a factor, or that the difference in the percentage  disbursed between 100 days and 200 days is greater than the difference  between 300 and 400 days. The sizable F-statistic at the base of the column  for model 1 attests to the significance of the effect of time, and this  nonlinear effect of time explains 17 percent of the variation in the amount  disbursed of the total remaining after the first disbursement.
Models 2, 3, and 4 estimate the gross effects of principal recipient type,  disease type, and grant size on the percentages disbursed, after subtracting  the amount of the first disbursement. These differences are estimated using  dummy variables to indicate the differences between the grant categories  named in the table and the omitted referent category (civil society for  principal recipient type, HIV/AIDS for disease type, and less than $2 million  for grant size). The constants for each of these models reflect the  percentages disbursed for grants in the referent categories, and the  coefficients indicate the differences between the percentages for the  categories in the table and the percentages for the referent categories. The  overall percentage disbursed was 21 points lower for ministry of finance  grants, and roughly 15 points lower for ministry of health grants and other  government grants, than for civil society grants. These differences reflect  the results of ignoring, rather than controlling for, differences in time since  first disbursement, grant size, and disease targeted.
Model 5 estimates all of these effects simultaneously and, as such, provides  us with net effect estimates, or estimates of each effect, controlling for the  others. It shows that the time each grant has had since its first  disbursement is the principal determinant of the amount disbursed. Grants  that made their first disbursement earlier disbursed larger amounts of their  remaining 2-year awards. After these effects were controlled for, the  differences between principal recipient types in the percentages disbursed  became smaller than they appeared before controls; and the only  difference, which had appeared marginally significant before controls,  became insignificant afterward. We found no significant differences by  disease type or grant size when looking at either the gross or net effects.
section_title: Timeliness of Disbursements
paragraphs: We also looked at the extent to which disbursements were made in a timely  fashion (i.e., in 135 days or less). As table 5 shows, 35 percent of all  disbursements were timely, or within 135 days, and the extent to which  disbursements were timely was greater for later disbursements than for  earlier disbursements. The number of timely disbursements is too small at  most stages for us to determine whether timeliness varies across grant  types.
section_title: Comments from the Global Fund
section_title: Joint Comments from the Departments of State and Health and Human Services, and the U.S. Agency for International Development
section_title: GAO Contact and Staff Acknowledgments
subsections: section_title: GAO Contact
section_title: Staff Acknowledgments
paragraphs: In addition to the person named above, Candace Carpenter, Martin de  Alteriis, David Dornisch, Cheryl Goodman, Kay Halpern, Bruce Kutnick,  Reid Lowe, Jerome Sandau, Douglas Sloane, Julie Trinder, and Tom Zingale  made key contributions to this report.