Report to Congress by the U.S. Global AIDS Coordinator on Oversight Information Pertaining to the Global Fund to Fight AIDS, Tuberculosis and Malaria (March 2008)

The Administration provides this Report pursuant to Report 110-197 of the 2008 State, Foreign Operations, and Related Programs Appropriations Bill, 2008, H.R. 2764: �The Committee remains concerned that the Global Fund is not providing adequate information about commitments and disbursements. The Committee directs the Coordinator to report within 45 days of enactment of this Act on the actions that the Global Fund will be taking in the coming year to provide more specific oversight information. Specifically, the Committee is interested in receiving regular audits of administrative expenditures, and detailed information on principal recipients and sub-recipients, including the identity of sub-recipients, the relationship of sub-recipients to principal recipients, the amount and nature of sub-recipient grants, and periodic reports on the results achieved by recipients and sub-recipients.�

To address the request outlined stated in Report 110-197 of the 2008 State, Foreign Operations, and Related Programs Appropriations Bill, H.R. 2764, the U.S. Global AIDS Coordinator invited the Executive Director of the Global Fund to Fight AIDS, Tuberculosis and Malaria, Prof. Michel Kazatchkine, M.D., to provide information on the Fund's audit processes as well as on reporting mechanisms for grant principal recipients (PRs) and sub-recipients (SRs). Prof. Kazatchkine's detailed response, along with several supplementary documents, is attached (Attachment 1- Global Fund Response).

The Global Fund is making headway in addressing the issues raised by the Committee. Improving the Fund's financial and programmatic accountability has been a key issue for the U.S. Government and a major point of discussion at Global Fund Board meetings. The progress that is being made is confirmed by the information provided by Prof. Kazatchkine. The Global Fund Secretariat, using a new data reporting tool, will soon collect and compile substantially more detailed information on the activities of PRs and SRs, and can make this information available to the Board and the Committee. Prof. Kazatchkine also notes the Secretariat's openness to sharing audit reports and other information of interest to the Committee.

The independent auditor of the Global Fund, Ernst & Young Ltd. has unrestricted access to all Global Fund records, and conducts a comprehensive annual audit of Global Fund expenditures. Normally the auditor presents the audit results to the Finance and Audit Committee (FAC) of the Global Fund Board, currently chaired by the U.S. Global AIDS Coordinator, at the FAC's March meeting. Prof. Kazatchkine notes that reports from Ernst & Young Ltd. are available upon request. We are attaching for your benefit a copy of the Fund's 2006 Financial Statement, as audited and approved by Ernst & Young Ltd (Attachment 2- Ernst & Young Financial Statements for Annual Report).

Grant Recipients and Sub-Recipients
In January, 2008, the Global Fund began implementation of an Enhanced Financial Reporting (EFR) system, a tool created to collect uniform and more detailed financial information from grant recipients (Attachment 3- Enhanced Financial Reporting Initiative; Attachment 4- EFR Guidelines; Attachment 5- Sample HIV/AIDS Financial Reporting Form; Attachment 6- HIV Financial Reporting Template). The Global Fund Secretariat piloted the EFR system in 2007, and informed the Global Fund Board in November 2007 of its intention to rollout this system during 2008. Grants are required to report via the EFR on an annual basis, as determined by the start date of each grant.

The EFR system establishes a considerably more rigorous reporting framework for grants and if its roll-out is successful, it should enable the Fund to provide much of the information the U.S. Government is seeking. The aforementioned EFR template requires a breakdown of a grant's various categories of spending, giving figures for both budgets and actual expenditures. The categories in include items such as technical assistance, training, health products and health equipment, and Monitoring and Evaluation. The framework also cross-references the budget data according to programmatic activity, including categories such as prevention, treatment, and care and support. Finally, the template cross-references budget data by the implementing entity.

Prof. Kazatchkine's letter makes clear that the EFR will collect and report information in most of the categories specified by the Committee. These categories include the identity of SRs, including the type of organization (e.g., governmental, civil society, faith-based, etc.), the relationship of SRs to PRs, and the dollar amounts of all sub-grants to SRs. It does not appear that the EFR system will collect data on the nature of sub-recipient grants; i.e., the type of programmatic activity in which each sub-recipient is engaged.

The reporting date for the first group of grants was January 31, 2008, and grantees will send data to Local Fund Agents (LFAs) by mid-March. The Secretariat expects to receive results from this first group in April, and notes that it will be able to share them with the Committee; the Secretariat can also share updates as grantees report further results.

The U.S. Government is encouraged by the development of this template, and believes it marks a significant step forward in terms of the Global Fund's ability to account for grantee expenditures, at least at level of the Principal Recipient and Sub-Recipients. Our office intends to monitor closely the roll-out of this system, and to assess whether it will capture sufficient data about the budgets and activities of the actual implementing entities. In many grants, sub-sub-recipients have actual responsibility for much of the implementation work, and it is not clear whether this system will collect sufficient data at that level. It is also worth noting that this is the first year of rolling out the system and it is likely to be fairly complex. We will carefully monitor its implementation.

Reporting on Results Achieved
In accordance with the Global Fund's principle of performance-based funding, the Secretariat receives results as reported by the PRs according to the Performance Framework that is a part of the grant agreement between the Global Fund and the PR. The results reported by the PR incorporate, but often do not disaggregate, the results of SRs; i.e., they are based on the work output and achievements of both sets of entities. These reported results are available on the Global Fund's website (, and Prof. Kazatchkine notes that the Secretariat can also make such reports available to the Committee.

One of our ongoing concerns about the Global Fund's reporting on results pertains to reporting of results. In some cases, grantees report to the Secretariat on the achievement of national targets, which may comprise the work of many different entities and different donor funding streams, but they provide little information on the actual role of the grantees or the Global Fund expenditures which contributed toward those results. The Coordinator's office therefore intends to continue to work with the Global Fund, at both the country level and the policy level, to improve the ability of the Global Fund Secretariat and its grantees to document and correctly report their actual results.

The Global Fund is an organization that is built upon the core principle of performance-based funding, and, therefore, the ability to track carefully the expenditure of and results achieved with its resources is a matter of the utmost importance to the Global Fund itself, and is an essential requirement of the U.S. Government's continued support for this institution. The Coordinator's Office has been and intends to continue to work closely with the Global Fund Secretariat on an ongoing basis in an effort to continually improve the Global Fund's systems of accountability, and in particular with their Enhanced Financial Reporting system. S/GAC is also looking at the Global Fund reporting systems with an eye to increase, where feasible, possible synergies with PEPFAR reporting as a part of the U.S. Government commitment to the �Three Ones.�

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