Global Health
Assessment of First Year Efforts of the Global Fund to Fight AIDS, TB and Malaria Gao ID: GAO-03-755T May 7, 2003By the end of 2002, more than 40 million people worldwide were living with human immunodeficiency virus/acquired immunodeficiency syndrome (HIV/AIDS), with 5 million newly infected that year. HIV/AIDS, along with tuberculosis (TB) and malaria, causes nearly 6 million deaths per year and untold human suffering. Established in January 2002, the Global Fund (the Fund) aims to rapidly disburse grants to augment existing spending on the prevention and treatment of these three diseases while maintaining sufficient oversight of financial transactions and program effectiveness. As of April 1, 2003, the United States had pledged $1.65 billion to the Fund and is expected to remain its single largest donor. In this study, GAO was asked to assess (1) the Fund's progress in developing governance structures; (2) the systems that the Fund has developed for ensuring financial accountability, monitoring and evaluating grant projects, and procuring goods and services; (3) the Fund's efforts to raise money; and (4) its grant-making process. In responding to our draft report, the Fund, the Department of Health and Human Services, the Department of State, and the U.S. Agency for International Development agreed with our findings.
The Fund has made noteworthy progress in establishing essential governance and other supporting structures and is responding to challenges that have impeded its ability to quickly disburse grants. A key challenge involves locally based governance structures, many of which are not currently performing in a manner envisioned by the Fund. The Fund has developed comprehensive oversight systems for monitoring and evaluating grant performance and ensuring financial accountability and has issued guidance for procurement; however, the oversight systems face challenges at the country level and some procurement issues have not been finalized. The Fund's ability to approve and finance additional grants is threatened by a lack of sufficient resources. Pledges made through the end of 2003 are insufficient to cover more than a small number of additional grants and without significant new pledges, the Fund will be unable to support all of the already approved grants beyond their initial 2-year agreements. Improvements in the Fund's grant-making processes have enhanced its ability to achieve its key objectives, but challenges remain. These challenges include ensuring that grants add to and complement existing spending on HIV/AIDS, TB, and malaria and that recipients have the capacity to effectively use grants.
GAO-03-755T, Global Health: Assessment of First Year Efforts of the Global Fund to Fight AIDS, TB and Malaria
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Testimony:
Before the Subcommittee on Foreign Operations, Export Financing, and
Related Programs, Committee on Appropriations, House of
Representatives:
United States General Accounting Office:
GAO:
For Release on Delivery Expected at 2:00 p.m. EDT Wednesday, May 7,
2003:
Global Health:
Assessment of First Year Efforts of the Global Fund to Fight AIDS, TB
and Malaria:
Statement of David Gootnick
Director, International Affairs and Trade:
GAO-03-755T:
GAO Highlights:
Highlights of GAO-03-755T, a report to the Chairman, Subcommittee on
Foreign Operations, Export Financing, and Related Programs, House
Committee on Appropriations
Why GAO Did This Study:
By the end of 2002, more than 40 million people worldwide were living
with human immunodeficiency virus/acquired immunodeficiency syndrome
(HIV/AIDS), with 5 million newly infected that year. HIV/AIDS, along
with tuberculosis (TB) and malaria, causes nearly 6 million deaths per
year and untold human suffering. Established in January 2002, the
Global Fund (the Fund) aims to rapidly disburse grants to augment
existing spending on the prevention and treatment of these three
diseases while maintaining sufficient oversight of financial
transactions and program effectiveness. As of April 1, 2003, the
United States had pledged $1.65 billion to the Fund and is expected to
remain its single largest donor. In this study, GAO was asked to
assess (1) the Fund‘s progress in developing governance structures;
(2) the systems that the Fund has developed for ensuring financial
accountability, monitoring and evaluating grant projects, and procuring
goods and services; (3) the Fund‘s efforts to raise money; and (4) its
grant-making process.
In responding to our draft report, the Fund, the Department of Health
and Human Services, the Department of State, and the U.S. Agency for
International Development agreed with our findings.
what GAO Found:
* The Fund has made noteworthy progress in establishing essential
governance and other supporting structures and is responding to
challenges that have impeded its ability to quickly disburse grants.
A key challenge involves locally based governance structures, many of
which are not currently performing in a manner envisioned by the Fund.
* The Fund has developed comprehensive oversight systems for monitoring
and evaluating grant performance and ensuring financial accountability
and has issued guidance for procurement; however, the oversight systems
face challenges at the country level and some procurement issues have
not been finalized.
* The Fund‘s ability to approve and finance additional grants is
threatened by a lack of sufficient resources. Pledges made through the
end of 2003 are insufficient to cover more than a small number of
additional grants and without significant new pledges, the Fund will
be unable to support all of the already approved grants beyond their
initial 2-year agreements.
* Improvements in the Fund's grant-making processes have enhanced its
ability to achieve its key objectives, but challenges remain. These
challenges include ensuring that grants add to and complement existing
spending on HIV/AIDS, TB, and malaria and that recipients have the
capacity to effectively use grants.
www.gao.gov/cgi-bin/getrpt?GAO-03-755T.
To view the full report, including the scope
and methodology, click on the link above.
For more information, contact David Gootnick at (202) 512-3149 or
gootnickd@gao.gov.
[End of section]
Mr. Chairman and Members of the Subcommittee:
I am pleased to be here today to discuss our assessment of the first
full year of operation of the Global Fund to Fight AIDS, Tuberculosis
and Malaria ("the Fund").
By the end of 2002, more than 40 million people worldwide were living
with human immunodeficiency virus/acquired immunodeficiency syndrome
(HIV/AIDS), with 5 million newly infected that year. HIV/AIDS, along
with tuberculosis (TB) and malaria, causes nearly 6 million deaths per
year. In addition to causing human suffering in sub-Saharan Africa and
elsewhere in the world, these diseases threaten economic growth and
raise the potential for increased conflict and political instability.
In January 2002, the Fund was established as a grant-making entity with
the goal of rapidly increasing spending on the prevention and treatment
of these diseases in resource-poor settings while maintaining
sufficient oversight of financial transactions and program
effectiveness.
My remarks will focus on several key areas, as discussed in our report
issued today:[Footnote 1] (1) the Fund's progress in developing key
governance structures, (2) the oversight mechanisms and procurement
policies approved by the Fund, (3) the Fund's efforts to mobilize
resources, and (4) the Fund's grant-making processes. I will highlight
the progress made and the key challenges that the Fund faces in each of
these four areas.
My observations are based on the work that our GAO team conducted over
the previous year. For this project, our team conducted audit work that
included site visits to Fund headquarters in Geneva, Switzerland, and
to Ethiopia, Haiti, Honduras, and Tanzania--four countries that were
awarded grants. We also obtained perspectives on the progress and
evolution of the Fund from officials at the Department of State, the
U.S. Agency for International Development, and the Department of Health
and Human Services.
Summary:
The Fund has established key governance structures, including a board
of directors, a secretariat, and a grant review process. It also has
called on potential recipient countries to establish structures at the
country level to develop, implement, and oversee grants. The principal
country-level governance structure, the Country Coordinating Mechanism
(CCM), is designed to provide a forum for locally based stakeholders to
develop, review, and submit grant proposals to the Fund and to follow
the progress of Fund-supported projects. However, a number of
challenges--for example, communication difficulties between the Fund
and the CCM and between the CCM chair and its members--have slowed the
establishment and effective operation of this key structure. The Fund
has acknowledged the CCM-related challenges and is working to address
them by enhancing its guidance and communications with CCMs.
The Fund has developed comprehensive oversight systems for ensuring
financial accountability and monitoring and evaluating grant
performance, and it has issued guidance on procurement. The Fund's
principal oversight entity at the country level, the Local Fund Agent
(LFA), is one of several potential contractors hired by the Fund and is
responsible for (1) ensuring that grant recipients account for the
money they spend and measure progress in fighting disease and (2)
assessing recipients' ability to procure goods and services. However,
the introduction of the LFA as an oversight mechanism has been marked
by controversy and misconceptions, which have delayed the designation
of LFAs in some countries, thereby slowing the implementation of
grants. The Fund has recognized these challenges and is working to
address them--for example, through its new guidelines on financial
management.
A lack of resources threatens the Fund's ability to approve and finance
additional grants. Although the Fund has announced plans to award new
grants in its third proposal round, planned for October 2003, pledges
made as of April 1, 2003, were insufficient to cover more than a small
number of new grants. Specifically, the Fund projects that it will
receive $1.6 billion in technically sound proposals at its next
proposal round in October 2003, but it currently has less than $300
million to support this round of grants. In addition, without
significant new pledges, the Fund will be unable to support all of the
already approved grants beyond the initial 2-year commitments. If all
currently approved grants demonstrate acceptable performance after 2
years, the Fund will require $2.2 billion more to assist these programs
for an additional 1 to 3 years.
The Fund has made improvements in its grant-making processes that
enhance its ability to achieve its key objectives. These improvements
include altering eligibility criteria to focus on the neediest
countries and adding additional members to the proposal evaluation
panel to increase its overall knowledge base and better prepare it to
evaluate nonmedical, development-related issues. However, the Fund
faces the ongoing challenges of ensuring that its grants augment and
complement existing spending on HIV/AIDS, TB, and malaria and that
recipients have sufficient capacity to effectively use these grants.
Although these coordination and capacity challenges are not unique to
the Fund, the Fund has recognized them, and its efforts to address them
are evolving.
Background:
HIV/AIDS, TB, and malaria, three of the world's deadliest infectious
diseases, cause tremendous human suffering and economic loss and
threaten political stability in many countries in sub-Saharan Africa
and the developing world. According to the Joint U.N. Program on HIV/
AIDS, in 2002, AIDS caused 3 million deaths, and 5 million people
became infected with HIV. More than 70 percent, or 28.5 million, of the
40 million people with HIV/AIDS worldwide live in sub-Saharan Africa.
However, according to a report by the National Intelligence Council,
HIV infections in just five populous countries--China, India, Nigeria,
Russia, and Ethiopia--will surpass total infections in central and
southern Africa by the end of the decade. According to the World Health
Organization, after AIDS, TB is the world's leading infectious cause of
adult mortality, resulting in as many as 2 million deaths per year.
Like HIV/AIDS, TB primarily affects the most economically active
segment of the population, with 75 percent of the annual deaths
occurring in those aged 15 to 54 years. Conversely, malaria, which
causes more than 1 million deaths and at least 300 million cases of
acute illness each year, is a leading cause of death in young children.
The disease exerts its heaviest toll in Africa, where about 90 percent
of annual malaria deaths occur.
The Fund was formally launched in January 2002. As of April 1, 2003,
the United States had pledged $1.65 billion[Footnote 2] to the Fund out
of total pledges of $3.37 billion and was its single largest donor.
(See fig. 1 for more information about the Fund's first year.):
Figure 1: Timeline of the Fund's First Year:
[See PDF for image]
[End of figure]
The Fund is a grant-making organization with the purpose of attracting,
managing, and disbursing funds that will increase existing resources
and make a sustainable and significant contribution to the reduction of
infections, illness, and death. It aims for an integrated and balanced
approach, covering prevention, treatment, care, and support. It also
seeks to establish efficient and effective disbursement mechanisms. In
the past year, the Fund has approved 153 grants in 81 countries across
the major regions of the world.[Footnote 3] These grants total nearly
$3.7 billion ($1.5 billion over the first 2 years) and cover all 3
diseases (see fig. 2). The Fund began disbursing money to grantees in
late 2002.
Figure 2: Approved Grants, by Disease and by Regiona:
[See PDF for image]
[A] Based on maximum allowable grant money for the full length of
board-approved programs for the Fund's first two proposal rounds.
[End of figure]
The Fund Has Established Necessary Governance Structures, but Its
Ability to Rapidly Disburse Grants Is Challenged at the Country Level:
In its first year, the Fund developed and established key headquarters
and country-level structures required to develop, implement, and
oversee grants. (See fig. 3). However, limited communication and the
evolving nature of these new structures, especially at the country
level, led to a lack of clarity over roles and responsibilities,
slowing the Fund's ability to sign the initial grant agreements. The
Fund has recognized these problems and is taking steps at both the
country and headquarters levels to address them.
Figure 3: The Fund's Governance Structure:
[See PDF for image]
Notes: The World Health Organization and the Joint U.N. Program on HIV/
AIDS assist the technical review panel with data and other expertise.
The Fund has entered into an agreement with the World Health
Organization for the provision of administrative services at the
headquarters level.
The arrows denote relationships but do not specify their nature, e.g.,
information or money flow vs. accountability.
[End of figure]
The CCM--the country-level governance structure designed to review and
submit proposals and follow the progress of Fund-supported programs--
identifies a principal grant recipient. The principal recipient is a
member of the CCM and is responsible for receiving and implementing the
grant. A principal recipient can be a government agency, a
nongovernmental organization, a private organization, or, if
alternatives are not available, a multilateral development
organization.
As of late 2002, in three of the four countries we visited there was
limited communication between the secretariat and the CCM and between
CCM leadership and other members. These communication problems and the
evolving nature of the country-level structures resulted in key
participants' being unsure of their roles in the proposal process and
unprepared to support the implementation of grants. In one country, the
CCM was better prepared largely because it had received a high level of
support from Fund staff and strong leadership from the CCM chair;
however, according to the Fund, it does not have sufficient resources
to provide this level of support to all CCMs. The Fund has acknowledged
the difficulties experienced by CCMs and is addressing them by
clarifying its guidance to CCMs. For example, it is conducting regional
workshops and working with local partners such as bilateral and
multilateral donors. In addition, the Fund is considering expanding the
secretariat to allow its staff to devote more time to advising
individual CCMs and to working with local partners that are assisting
with grant implementation.
The Fund Developed Comprehensive Oversight Systems, but the Systems
Face Challenges:
The Fund has developed systems for financial accountability and for
monitoring and evaluating grant activities. However, in the Fund's
first year of operation, these systems faced challenges at the country
level. The introduction of the local fund agent (LFA)--the Fund's
representative in each recipient country--has been marked by
controversy and misconceptions regarding its oversight role. For
example, several government officials in one of the countries that we
visited believed, incorrectly, that a government ministry would be
permitted to perform the functions of the LFA, even though the grant
recipient is another government ministry. This contradicts explicit
Fund instructions that the LFA must be independent from the grant
recipient. Also, stakeholders in recipient countries have assumed,
incorrectly, that the LFA was charging an exorbitant fee and deducting
it from the grant. In fact, LFA fees are funded through the
secretariat, not deducted from each grant.
Finally, in countries with a limited number of qualified personnel and
organizations, LFAs will face the challenge of maintaining the
independence necessary to avoid real or perceived conflicts of
interest. These problems may delay the designation of LFAs in some
countries, slowing the implementation of the first round of grants. The
Fund is aware of these issues and is taking measures to address them.
For example, in January 2003, the Fund drew up guidelines on financial
management arrangements for principal recipients that, among other
things, includes options for the use of credible, existing local
systems.
The Fund has developed detailed procurement requirements for drugs and
medical supplies as well as more general requirements for procuring
goods and services. These requirements are focused primarily on
procuring drugs and public health products in a manner that ensures
quality, safety, and the lowest possible prices. The requirements also
stipulate that no Fund money may be used for procuring drugs or other
health products until the Fund, through the LFA, has verified that
recipients have the capacity to manage procurement tasks such as
purchasing, storing, and distributing these products in accordance with
Fund guidance, unless the Fund agrees otherwise.
Lack of Resources Threatens Fund's Ability to Continue to Approve and
Finance Grants:
The Fund's ability to approve and finance additional grants is
threatened by a lack of sufficient resources. The Fund has announced
plans to award new grants in its third proposal round in October 2003.
However, pledges made through April 1, 2003, for this year are
insufficient to cover more than a small number of additional grants.
The Fund has less than $300 million to support commitments in round 3-
-significantly less than the $608 million in 2-year grant commitments
approved in the first round and the $884 million approved in the second
round (see fig. 4).
Figure 4: Pledges Made, Amount Received, and Grant Proposals Approved:
[See PDF for image]
[A] The pledges expected through 2008 include $173 million that has no
specified arrival date.
[B] These numbers represent the maximum amount approved by the board.
Final budgets may be reduced during grant agreement negotiations. Five-
year figures are potential, rather than guaranteed, commitments.
Note: A shortfall in the funding of already approved grants is evident
when 5-year commitments are compared with total pledges over this time
frame. The small amount of resources available for funding new grants
is evident when comparing 2-year commitments with pledges through 2003.
[End of figure]
Based on the number of technically sound proposals it expects to
receive and approve in future rounds and the amount received as of
April 1, 2003, the Fund projects that it will require $1.6 billion in
new pledges in 2003 and $3.3 billion in 2004. In addition, without
significant new pledges, the Fund will be unable to support all of the
already approved grants beyond the initial 2-year commitments.
Specifically, if all currently approved grants demonstrate acceptable
performance after 2 years, the Fund will require $2.2 billion more to
assist these programs for an additional 1 to 3 years. Of the $3.37
billion pledged as of May 2003, 97 percent was pledged by governments
and only 3 percent was pledged by the private sector, including
foundations, corporations, and individuals.
Improvements Made in Grant Decision-Making Process, but Challenges
Remain:
The Fund made improvements in its grant decision-making process and
enhanced its ability to serve its key objectives. For example, the Fund
altered eligibility criteria to focus on the neediest countries and
added additional members to the technical panel responsible for
reviewing proposals to increase its overall knowledge base and better
prepare it to evaluate nonmedical, development-related issues. However,
the Fund and its stakeholders have identified ongoing challenges to the
grant decision process, including ensuring that grants augment and
complement existing spending on HIV/AIDS, TB, and malaria and that
recipients have sufficient capacity to effectively use the grants. For
example, the Fund has not yet developed a system for monitoring whether
the grants in fact add to and complement existing spending once
disbursed. The Fund has recognized these challenges, and its efforts to
address them are evolving.
Conclusion:
In conclusion, our assessment of the Fund's first year of operation
indicates that it provides a promising mechanism to complement
bilateral, multilateral, and private initiatives to fight three of the
world's deadliest diseases. However, the Fund's success will depend on
its ability to meet the challenges of facilitating effective locally
based governance and oversight mechanisms and raising sufficient
resources to continue to approve and finance grants. The Fund's success
will also depend on its ability to ensure that its grants augment and
complement existing spending on HIV/AIDS, TB, and malaria and that
recipients have the capacity to effectively implement Fund-supported
programs.
Mr. Chairman and members of the committee, this concludes my prepared
statement. I will be happy to answer any questions you may have at this
time.
Contacts and Acknowledgments:
For information on this statement, please contact David Gootnick,
Director, International Affairs and Trade, at (202) 512-3149 or Thomas
Melito, Assistant Director, at (202) 512-9601. You may reach them by
email at gootnickd@gao.gov or melitot@gao.gov. Other individuals who
made key contributions to this testimony include Sharla Draemel, Kay
Halpern, and Tom Zingale.
FOOTNOTES
[1] U.S. General Accounting Office, Global Health: Global Fund to Fight
AIDS, TB and Malaria Has Advanced in Key Areas, but Difficult
Challenges Remain, GAO-03-601 (Washington, D.C.: May 7, 2003).
[2] Through fiscal year 2003, the United States had appropriated up to
$650 million to the Fund, and it has pledged an additional $1 billion
over 5 years, beginning in 2004.
[3] This country total does not include one global grant and grants to
two regions.
