GLOBAL FUND OBSERVER (GFO), Issue 107: 30 September 2009.

[Guest guest]

GLOBAL FUND OBSERVER (GFO), an

independent newsletter about the Global Fund provided by Aidspan to over 8,000

subscribers in 170 countries.

Issue 107: 30 September 2009.

(For formatted web, Word and PDF versions of this and other issues, see www.aidspan.org/gfo)

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CONTENTS

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1.

NEWS: Global Fund suspends grants to the Philippines and Mauritania

The Global Fund has temporarily suspended

five grants to the Philippines,

citing unauthorized expenditure by the PR, and one grant to Mauritania, citing fraud. These are

the Fund’s first grant suspensions since it suspended grants to Chad three years ago and Uganda four years ago.

2. COMMENTARY: Full Disclosure Works

" Anyone who imagines that the Global

Fund could disburse billions of dollars without some of it being mis‑used is

naive. The question is not whether some of the money will be diverted, but rather

how much, and whether the diversion is detected, and what is done once it is

detected. "

3.

NEWS: Round 9 Approved Grants Will Exceed Two Billion Dollars

The TRP has recommended that the Global

Fund Board approve Round 9 grants that, over their first two years, will cost

$2.21 billion dollars. This makes Round 9 the second largest round ever of

Global Fund grants.

4. NEWS:

Rolling Continuation Channel Suspended

The Global Fund Board has provisionally

suspended the submission of new proposals through the rolling continuation

channel (RCC).

5. NEWS:

Global Fund Introduces New System for Procurement Reporting

The Fund’s Price & Quality Reporting

System is a web-based database system which tracks information about the prices

and quality of health products procured with money from the Fund. Tests by

Aidspan reveal some shortcomings.

6.

ANALYSIS: CCMs – Status, Power Dynamics and Decision-Making: A Call for

Feedback

Aidspan invites feedback from GFO readers

about how decisions are made on CCMs and, more broadly, about the authority of

CCMs.

7.

NEWS: Other-Language Versions of Aidspan’s Oversight Guide Issued

French, Russian and Spanish versions of " The Aidspan Guide on the Roles and Responsibilities

of CCMs in Grant Oversight " are now available.

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1. NEWS: Global Fund suspends grants

to the Philippines and Mauritania

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The Global Fund has temporarily suspended five grants

to the Philippines, citing

unauthorized expenditure by the principal recipient (PR), and one grant to Mauritania,

citing fraud. These are the Fund’s first grant suspensions since it suspended

grants to Chad three years

ago and Uganda

four years ago.

Press releases announcing the suspensions were posted

by the Fund at www.theglobalfund.org/en/pressreleases

on September 24 (the Philippines)

and September 4 (Mauritania).

The Philippines:

The Global

Fund has temporarily suspended all five of its currently active grants to the

main Philippines PR, the Tropical Disease Foundation (TDF), a non-profit

science foundation that performs research, service, and training projects in

infectious diseases. These suspended grants represent 90% of the approved value

of all grants to the Philippines;

the remaining 10% goes to two other PRs that are not affected.

The Fund says that it suspended the grants because it

found evidence of " unauthorized expenditure " by TDF. It adds that an

investigation by the Fund’s Inspector General found that around $1 million out

of the $85 million that has been sent thus far to TDF has been spent on

" activities beyond the terms of the grant agreement. " The Fund has

demanded repayment of this money.

GFO understands, after interviewing people in several

countries, that the transactions to which the Global Fund has objected involved

a complex series of financial transfers by TDF that ended up using about $1

million in Global Fund money to accelerate the paying down of a mortgage on

TDF’s head office, even though the payments were not documented as being for

that purpose and were not permitted to be used for that purpose. Apparently, no

evidence was found of anyone personally benefiting from these transfers. This

scheme was first reported to the Fund by a whistle-blower. The Fund’s Inspector

General sent in a forensic audit team within three weeks of receiving the allegations,

all of which were confirmed.

TDF responded to the suspension with a press release

stating that it " has at all times acted in good faith. " TDF

complained, in effect, that after the Fund and TDF signed a grant agreement and

the TDF incurred some expenditures that were within the terms of that grant

agreement and were audited, the Fund introduced new policies which caused these

already-made expenditures to become " unauthorized " . TDF Executive

Director Dr. Thelma Tupasi, when contacted by GFO, declined to discuss the

matter on the grounds that the investigation is still ongoing.

Until the suspensions, over $110 million in

contractually-approved funding was still due to go to TDF in its capacity as

PR. TDF grants have generally performed well. Since the start of 2008, TDF has

received seven A, A1 and A2 ratings from the Global Fund, three B1 ratings, and

no B2 or C ratings. The Fund says that it continues to value TDF’s technical

expertise, particularly in multi-drug resistant tuberculosis.

Despite TDF’s technical competence, the Global Fund

says that it is not willing to permit TDF to continue as PR. Instead, the Fund

will transfer the grants to one or more new PRs based on recommendations from

the CCM. The Fund " expects that normal grant activities can resume

quickly, " and says that " all necessary measures " will be taken

to ensure that there are no treatment interruptions for the 636 people

receiving ARV treatment and the 811 people being treated for multi-drug

resistant TB.

The full list

of Global Fund grants to the Philippines

is as follows:

Table:

Global Fund grants to the Philippines

PR

Round

Disease

Grant agreement amount

Disbursed

Still to disburse

Tropical Disease

Foundation

(To be replaced by one or

more new PRs)

2

Malaria

$43.7 m.

$16.4 m.

$27.3 m.

2

TB *

$106.5 m.

$27.6 m.

$78.9 m.

3

HIV/AIDS

$5.5 m.

$5.3 m.

$0.3 m.

5

HIV/AIDS

$6.5 m.

$4.6 m.

$1.9 m.

5

TB *

$16.7 m.

$16.7 m.

$0

6

Malaria

$16.3 m.

$14.3 m.

$1.9 m.

Subtotal:

$195.2

m.

$84.9

m.

$110.3

m.

Pilipinas Shell

Foundation

(No change)

5

Malaria

$14.3 m.

$12.8 m.

$1.5 m.

Department of Health

(No change)

6

HIV/AIDS

$7.3 m.

$6.6 m.

$0.7 m.

All

grants

$216.9

m.

$104.2

m.

$112.6

m.

* The Round 2 and Round 5 TB grants

are due to be consolidated into a single grant.

Over 80% of TDF’s funding apparently comes from the Global

Fund, so the impact on the organisation of a true termination could be very

severe. However, the Fund’s public statement on this matter does not rule out

the possibility that TDF will be permitted to resume some of its activities

through being chosen as a sub-recipient (SR) by the new PR(s).

Mauritania:

The Global Fund has temporarily suspended its Round 5

HIV grant to Mauritania;

this is the Fund’s only active HIV grant to that country. The PR in question is

the Executive Secretariat of Mauritania’s National AIDS Committee, known by its

French acronym SENLS.

The Fund says that it suspended the grant after its

Inspector General found evidence of " fraudulent and unjustified

expenditures. " The Global Fund has demanded reimbursement of $1.7 million

that was " found to be subject to fraud, " and has also called for

immediate removal of the people identified as responsible.

GFO understands that the problems with the Mauritania

grant were first identified by the Local Fund Agent. Allegations include that

some companies that supposedly sold goods to the PR or to SRs did not in fact

exist, and that some of the documentation used was false. Evidence has been

forwarded by the Global Fund to the Mauritanian authorities to support a

possible criminal investigation.

Attempts by GFO to obtain comments from SENLS were not

successful.

Some $6.6 million has thus far been disbursed to SENLS

under the grant. Of this, the Fund says that its Inspector General found that

" substantial " further amounts, beyond the $1.7 million mentioned

above, " were not supported by appropriate documentation. " A further

$8.5 million is still due to be disbursed by the Global Fund under this grant.

Malaria and tuberculosis grants awarded to UNDP, the

other PR in Mauritania,

are not affected.

Since the start of 2008, SENLS has received one B1

rating from the Fund, three B2 ratings, and no A or C ratings. The grant is

more than one year behind schedule.

The Fund says that it wants the Mauritanian authorities

to put in place a CCM that is " in accordance with the Global Fund’s

eligibility criteria, " and that the CCM should ensure that the PR has a

structure and leadership that is able to safely manage the funds. This suggests

that the Fund believes that the current CCM is not compliant with Global Fund

requirements – even though the CCM passed the Fund’s screening process in

mid-2008, when Round 8 proposals were evaluated. The Fund did not specify that

SENLS must be replaced with a different PR.

The Fund says that " all necessary measures "

have been taken to ensure that there are no treatment interruptions for the

approximately 1,000 people receiving ARV treatment in Mauritania through Global Fund

financing.

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2. COMMENTARY: Full Disclosure Works

by Bernard Rivers

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Anyone who imagines that the Global Fund could

disburse billions of dollars without some of it being mis‑used is naive. The

question is not whether some of the money will be diverted, but rather how

much, and whether the diversion is detected, and what is done once it is

detected.

Most funding institutions keep very quiet about any

abuses they find regarding how their grants have been used. Some even refrain

from investigating in the first place, perhaps for fear of what they will find.

The Global Fund has always taken a different approach, seeking both to know the

truth and to be open about it, even if the truth is distasteful.

For a long time the Global Fund had no Inspector

General to unearth possible corruption by grant recipients or within the Fund

itself. Then it appointed an Inspector General who ended up having few

successes and many fights with the Secretariat. Eventually it appointed the

current Inspector General, but gave him insufficient funding to recruit a

strong staff. Moreover, the relevant web pages at www.theglobalfund.org/en/oig

made it very hard to understand what the role of the Inspector General was or

how a whistle-blower should contact him. Fortunately, these problems have now

been largely resolved, and nearly seven years after the Fund opened its doors,

the Inspector General and his team are getting up to speed.

The fact that the Inspector General is vigorously

pursuing actual and possible cases of corruption will send shivers through

those contemplating or engaging in corrupt practices. And although one or two

short-sighted donors may cite the Philippines

and Mauritania

cases as reasons to criticise the Fund, most donors are likely to be pleased

that the Fund seeks to uncover rather than to conceal the inevitable attempts

to divert the money from its intended purpose.

One final note: Given the Global Fund’s commitment to

openness and transparency, why is it that the Fund’s press releases about the

suspension of grants to the Philippines

and Mauritania

were placed on the Fund’s website but not emailed to the Fund’s media contacts?

These contacts have been emailed vastly less important press releases (such as

" Global Fund Executive Director addresses UN Secretary General’s Global

Health Forum " ); they deserve to be told this latest news as well.

[bernard Rivers (rivers@...)

is Executive Director of Aidspan and Editor of its GFO.]

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3. NEWS: Round 9 Approved Grants Will Exceed Two Billion Dollars

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After

conducting its detailed review of Round 9 proposals, the Global Fund’s

Technical Review Panel (TRP) has recommended that the Global Fund Board approve

grants that, over their first two years, will cost $2.21 billion dollars. This

makes Round 9 the second largest round ever of Global Fund grants.

GFO has no information on which specific proposals the

TRP has recommended for Board approval. But Board members have been informed by

the Secretariat of some overall data. Highlights from what Board members were

told, and from GFO’s analysis of that information and of comparisons with

earlier rounds, are as follows:

Ninety-six

Round 9 proposals have been recommended for approval, with a total

two-year cost of $2.21 billion (at current exchange rates), down from

$3.06 billion in Round 8, the largest Round, but well up from $1.12

billion in Round 7, the previous second largest.

The

average Round 9 proposal recommended for approval has a two-year cost of

$23 million, down from $33 million in Round 8, but again well up from

Round 7, the previous second highest.

The

number of proposals recommended for approved in Round 9 (96) is almost

identical to that in Round 8 (94). The main difference between Rounds 9

and 8 lies in the average proposal size.

Fifty-one

percent of proposals considered by the TRP in Round 9 have been

recommended for approval, slightly down from 54% in Round 8, the Round

with the highest percentage.

Proposals

for TB were the most successful in Round 9, at 60%, compared with 55% for

malaria and only 41% for HIV. But the recommended malaria proposals were

the largest, averaging $35 million, compared with $25 million for HIV and

$16 million for TB.

The

TRP completed its review of proposals earlier this month. Individual

applicants should be informed shortly, if they have not already been, of

what the TRP has recommended regarding their specific proposals. Then on

9-11 November the Board will make a final decision regarding each

proposal.

Further

details regarding some of these points are provided in the following two

tables.

Round 9 results

Proposals

submitted to Global Fund

Of

which, forwarded to TRP

Of

which, recommended for approval

Number

Total cost

Number

Total

cost

Number

Percentage

Total

cost

Average

cost

HIV/AIDS

80

$2.38 b.

73

n/a

30

41%

$0.75 b.

$25 m.

Malaria

33

$1.33 b.

31

n/a

17

55%

$0.60 b.

$35 m.

TB

57

$1.17 b.

53

n/a

32

60%

$0.50 b.

$16 m.

[HSS]

[n/a]

[n/a]

[33]

[n/a]

[17]

[49%]

[$0.36 b.]

[$21 m.]

Total

170

$4.88

b.

157

$4.8

b.

96

51%

$2.21

b.

$23 m.

Notes:

Proposals submitted by applicants to the Global Fund are

first checked for eligibility. A few are " screened out " ; the

remainder are then forwarded to the TRP for consideration.

Proposals listed do not include those submitted under

the First Learning Wave of National Strategy Applications; nor do they include

those under the " Rolling Continuation Channel " option.

" HSS " represents the Health Systems

Strengthening parts that were attached to HIV, malaria or TB proposal

components.

" Cost " means the upper ceiling for the budget

for Years 1 and 2 (i.e. for Phase 1).

n/a = not available.

An article in GFO Issue 105, entitled " Demand for

Round 9 Is Significant, " inadvertently inverted data for TB and

malaria proposals, based on an error in a Secretariat communication to the

board. The error is corrected in the above table.

For comparison: Results from earlier rounds

Proposals submitted to

Global Fund

Of which, forwarded to

TRP

Of which, approved

Number

Total cost

Number

Total cost

Number

Percentage

Total cost

Average cost

Round 8:

HIV/AIDS

83

n/a

76

$3.0 b.

37

49%

$1.16 b.

$31 m.

Malaria

43

n/a

41

$2.0 b.

28

68%

$1.57 b.

$56 m.

TB

59

n/a

57

$1.1 b.

29

51%

$0.33 b.

$11 m.

Total

185

n/a

174

$6.1 b.

94

54%

$3.06 b.

$33 m.

Round 7:

HIV/AIDS

n/a

64

$1.24 b.

26

41%

$0.54 b.

$21 m.

Malaria

n/a

45

$0.84 b.

28

62%

$0.47 b.

$17 m.

TB

n/a

41

$0.31 b.

19

46%

$0.11 b.

$6 m.

Total

n/a

150

$2.40 b.

73

49%

$1.12 b.

$15 m.

Round 6:

HIV/AIDS

n/a

82

$1.31 b.

32

39%

$0.45 b.

$14 m.

Malaria

n/a

59

$0.85 b.

19

32%

$0.20 b.

$11 m.

TB

n/a

55

$0.36 b.

34

62%

$0.19 b.

$6 m.

Total

n/a

196

$2.52 b.

85

43%

$0.85 b.

$10 m.

Round 5:

Total

n/a

202

$3.3 b.

63

31%

$0.7 b.

$12 m.

Round 4:

Total

n/a

173

$2.5 b.

69

40%

$1.0 b.

$14 m.

Round 3:

Total

n/a

180

$1.8 b.

71

39%

$0.6 b.

$9 m.

Round 2:

Total

n/a

229

$2.1 b.

98

43%

$0.9 b.

$9 m.

Round 1:

Total

n/a

204

$1.5 b.

58

28%

$0.6 b.

$10 m.

Note: Approved proposals do not

include those initially rejected but eventually approved after appeal.

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4. NEWS: Rolling Continuation Channel Suspended

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The Global

Fund Board has provisionally suspended the submission of new proposals through

the rolling continuation channel (RCC). The decision was made using email

voting. The Board may make the suspension permanent when it discusses the

matter more fully at its next meeting in November 2009. RCC proposals, which

are submitted by invitation only, are a means for requesting continued funding

once grants have reached the end of their first five years.

The decision was made because of financial pressures

facing the Global Fund. Earlier this year, the Board established a Working Group on Managing the Tension Between Demand

and Supply in a Resource-Constrained Environment. Given that at its

November meeting the Global Fund Board will be approving not only Round 9

proposals but also proposals from the first learning wave of National Strategy

Applications (NSAs), the Working Group recommended – and the Board approved –

that the RCC be suspended (or, potentially, permanently ended) in order to

increase the amount of money available in 2010 to fund approved proposals for

Round 9 and the NSAs.

In formulating its recommendation, the Working Group

noted that the discontinuation of the RCC is likely to be proposed to the Global

Fund Board in November as part of the funding architecture review currently

underway. That review is expected to recommend new means for continuing some

grants beyond five years.

Although the Board decided to approve the suspension

of the RCC, it allowed the following RCC proposals to proceed:

any RCC

proposals submitted prior to 21 August 2009;

any

RCC proposals submitted in response to an invitation to submit a new

proposal as a result of a determination by the Secretariat prior to 1

August 2009 that an expiring grant qualified for RCC; and

any

RCC proposals submitted in response to an invitation to re-submit a

proposal due to an earlier RCC proposal having received a Category 3A

recommendation from the Technical Review Panel (TRP).

The Global Fund Board approved proposals from Wave 6

of the RCC in May 2009. The Board is expected to approve Wave 7 proposals

shortly. With respect to Wave 8, the Global Fund Secretariat review to

determine which grants are eligible to apply for RCC took place prior to 1

August 2009, so this wave will be allowed to proceed (though the date for

submission of Wave 8 proposals will be delayed until after the Board has

approved Round 9 proposals). Wave 9 is the first RCC wave affected by the

suspension.

The Working Group estimated that this decision will

save $300 million in 2010.

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5. NEWS: Global Fund Introduces New System for Procurement Reporting

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In February

2009, the Global Fund introduced the Price & Quality Reporting System

(PQR), a web-based database system which tracks information about the prices

and quality of health products procured with money from the Fund. Tests by

Aidspan, publisher of GFO, reveal some shortcomings with the system.

The PQR can be accessed at http://pqr.theglobalfund.org.

It replaces the former Price Reporting Mechanism (PRM).

The PQR aims to provide information that will help

principal recipients (PRs) to negotiate competitive price and delivery

conditions; enable donors to know how money disbursed by the Global Fund for

heath products has been spent; identify whether money from the Fund is spent on

quality assured products; enable monitoring of the performance of suppliers;

and more.

The PQR is intended to be used by PRs, Local Fund

Agents (LFAs), Global Fund Secretariat staff, Global Fund partners and the

general public.

Under their Grant Agreements, PRs are required to

enter certain procurement information in the PQR, and the Fund says that it

will not disburse funds to PRs who have not carried out this data entry.

Information must be entered on the purchase and

quality of antiretroviral drugs (ARVs), artemisinin-based combination therapy

(ACT), tuberculosis medicines, bednets, condoms and rapid diagnostics kits.

LFAs are required to verify the data entered by PRs. The

LFA checks each invoice after it is entered in the PQR database, and also

verifies the completeness of PQR data when it reviews each disbursement request

from the PR.

In order to enter data in the system, PRs and LFAs

require a user name and password. However, the reports produced by the system

can be viewed by anyone. Any visitor to the website is supposed to be able to

generate the following reports:

" Supplier

list " : This lists, for each supplier that has been entered in the

system, the supplier name, supplier type, and contact details. The user

can, for example, generate a report showing all suppliers in a particular

country.

" Manufacturer

list " : This is similar, but deals with manufacturers rather than

suppliers.

" Product

Catalogue " : This lists, for each product that has been entered in the

system, the product name, generic name, brand name, product category,

manufacturer, manufacturer country, and the mean, median, highest and

lowest price at which the product has been purchased by users of the system.

The user can, for example, generate a report showing the range of prices

paid for each product supplied by a particular manufacturer.

" Spend

Report " : This lists the total amount that has been spent by month on

all products combined, by country and grant.

" Full

PQR Report " (referred to in the manual as " Purchase Price

Report " ): This provides all available information on every purchase

that has been entered into the system. The user can restrict the report by

region, country, grant number, purchasing organisation, therapeutic

category, generic name, display name or manufacturer, and various

combinations thereof.

Aidspan was unable to assess how easy it is to enter

data in the PQR system because only PRs and LFAs are provided with the

appropriate access. There is a user manual and a " quick guide " on the

PQR home page explaining how to do data entry.

Aidspan tested the PQR reporting system on 28

September, with the following findings:

Attempts

to run the Supplier List, Manufacturer List and Spend Report were

successful.

Attempts

to run the " View All " option of the Product Catalogue report led

to the browser freezing.

Attempts

to run the Full PQR report produced an error message and no data.

In light of these problems, it is not yet possible to

determine the usefulness of PQR reports. The Global Fund Secretariat has

acknowledged the problems, and has stated that an updated version of the PQR

system, with some new and updated reports, is scheduled for release on October

23.

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6. ANALYSIS: CCMs – Status, Power Dynamics and Decision-Making: A Call

for Feedback

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The Global

Fund’s CCM Guidelines state that CCMs should promote a " true

partnership, " with all CCM members being treated as equal partners in

decision-making. But is this " true partnership " principle a reality

on most CCMs? We don’t know for sure because there has not been any extensive

research on the issue.

A number of CCM case studies conducted in the last year

or so by the Global Fund and by the International Treatment Preparedness

Coalition (ITPC) provide some clues. The case studies looked at a number of

issues concerning the structure and operations of CCMs, including governance

and civil society participation.

The case studies found that on some CCMs, civil

society was participating equally and had a significant impact on

decision-making. However, on the majority of CCMs the participation of CCM

members was not equal and decision-making tended to be tilted in favour of

government.

In those cases where participation was deemed to be

unequal, the reasons for the inequality varied by CCM, but included such

factors as the following:

Within

the CCM, government wields far more power than civil society organisations

(CSOs), and the CCM as a whole tends to be deferential toward government,

which is reflective of the culture of the country.

Information

is hoarded by government and not shared with CSOs.

Governments

and/or development partners show a lack of respect for CSOs; they do not

believe that CSOs bring significant value or deserve to be treated as

equal partners.

High-level

government representation on the CCM is lacking, underscoring the fact

that the CCM is not valued by government.

Civil

society representatives on the CCM are significantly out-numbered by

government representatives.

The

civil society sector is weak, and many CSO representatives lack the

capacity to function effectively on the CCM.

In addition, sometimes the CCM as a whole is not very

influential. In one of the case studies, for instance, it was found that the

CCM did not have the power to influence any decisions concerning Global

Fund-related activities in the country. Rather, decisions were made by the PR.

All of this raises some questions about how decisions

are made on CCMs and, more broadly, about the authority of CCMs. For example:

1. What is the status of the CCM?

Does it have the authority (as it should) to make decisions about the content

of proposals submitted to the Global Fund, to nominate PRs, and to oversee

grant implementation?

2. Does the CCM speak for the

country?

3. How are decisions made on the

CCM? Do all members of the CCM participate equally in decision-making? Do all

members of the CCM have the opportunity to participate in discussions? Are

their voices heard?

4. How does the CCM make

decisions when government wants to do something but the non-government sectors

do not?

We’d like to hear your responses to these questions.

You can address all of the questions, or just the ones that interest you. To

make it as easy as possible for you to provide feedback, you can choose either

of the following two methods:

1. You can send your feedback via

email directly to Garmaise, Senior Analyst, Aidspan, at garmaise@....

2. You can write to

Garmaise, indicate that you are interested in giving feedback, and provide a

telephone number where you can be reached. will call you and obtain your

input over the phone.

Once we have heard from a sufficient number of people,

we will summarise the response in a follow-up article in GFO and/or in a

separate report. We will not reveal the identities or organisations of those we

hear from.

GFO reported on the CCM case studies

conducted by the Global Fund in Issues 95 and 101; and on the case studies

conducted by ITPC in Issue 99. All three issues are available at www.aidspan.org/gfo.

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7. NEWS: Other-Language Versions of Aidspan’s Oversight Guide Issued

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French,

Russian and Spanish versions of " The

Aidspan Guide on the Roles and Responsibilities of CCMs in Grant

Oversight " are now available at www.aidspan.org/guides. The

English edition was posted earlier. For a full description of the contents of

the guide, see Issue 103 of GFO (available at www.aidspan.org/gfo).

" Reproduced from the Global Fund Observer

Newsletter (www.aidspan.org/gfo), a service of Aidspan. "

Forwarded by:

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Yours in Global Concern,

A.SANKAR

Executive Director- EMPOWER

107J / 133E, puram

TUTICORIN-628 008, TN, INDIA

Telefax: 91 461 2310151;

Mobile: 91 94431 48599: www.empowerindia.org

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