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Africa: Decisive Year for Global Fund

AfricaFocus Bulletin
May 9, 2012 (120509)
(Reposted from sources cited below)

Editor's Note

"We write as global health groups, communities affected by HIV, TB, and Malaria, and researchers from around the world to urge you not to undermine the founding principle of a demand-driven Global Fund. We are united against proposals to set 'envelopes' or 'allocations' for each country, which would result in limited ambition, scaled back or skewed plans, and ultimately a failure to get ahead of death and new infections. Limiting ambition now will only cost more in the future - in lives and money." - civil society letter to Global Fund Board

The Global Fund to Fights Aids, Tuberculosis and Malaria provides about 20% of all international financing for AIDS, about 65% for tuberculosis and almost 60% for malaria. The Fund has approved over $22 billion in grants in 150 countries, and it estimates that programmes that it supports have saved over 8.6 million lives. Despite recent oftenmisreported news stories about fraud in some of the Fund's country programs, it has been an effective, innovative, and transparent pioneer of new approaches to global public health funding, responding to country initiatives and making it possible to scale up responses.

Yet 2011 was, according to Bernard Rivers, editor of the independent and highly respected Global Fund Observer, the Fund's worst year ever. Its transparency, unequaled among other funding agencies, backfired as poor public relations failed to counter misleading news stories. And internal management problems were exacerbated rather than solved by the Fund's board.

It is too soon to judge the results from the appointment in February of a new general manager, Brazilian banker and development manager Gabriel Jaramillo. There is no doubt that management improvements were and are needed, and there are some indications that on this front he is making progress. However, there are also serious policy questions on which activists fear that "reforms" might serve to enable backtracking on key features of the Global Fund's positive innovations, to revert to more traditional aid models where programs are planned based on donors' prior commitments rather than on the results needed.

This AfricaFocus Bulletin contains two relevant documents, as the Global Fund board meeting takes place this week in Geneva. The first is a letter from civil society groups stressing the importance of retaining the demand-drive funding model, and the second a more extensive analysis of the current situation of the Global Fund by Bernard Rivers.

The website of the Global Fund is at http://theglobalfund.org/en/

For previous AfricaFocus Bulletins on health issues, see http://www.africafocus.org/healthexp.php

++++++++++++++++++++++end editor's note+++++++++++++++++

Letter to the Global Fund Board

Background note, in addition to the Letter below, available at http://icssupport.org/home/call-on-the-global-fund-board

May 2012

To the Global Fund Board:

We write as global health groups, communities affected by HIV, TB, and Malaria, and researchers from around the world to urge you not to undermine the founding principle of a demand-driven Global Fund. We are united against proposals to set "envelopes" or "allocations" for each country, which would result in limited ambition, scaled back or skewed plans, and ultimately a failure to get ahead of death and new infections. Limiting ambition now will only cost more in the future - in lives and money. Instead we must continue the push for the boldest plans possible. We must focus, not on limiting country strategies, but on impact in the short term and ensuring predictable, sufficient funding is available long term.

The Demand Driven Model is Needed to End the Crises: The Global Fund is the most innovative, far-reaching, resultsdriven health financing mechanism in the world. We remind leaders that it was, in fact, born out of the failure of other development institutions - largely funding "envelope" driven - to respond to the three pandemics. World leaders, including all G8 countries, committed to ensuring that no ???costed, credible??? plan would go unfunded.

Today we face a crisis of success: high quality proposals, new science and quality implementation are making it now possible to imagine the end of the AIDS, TB, and malaria crises. We are disturbed by proposals that look backward to the very models that have failed to end the pandemics and urge the board to maintain the innovation and commitment to scale embodied in the demand-driven model.

Better, Predictable Funding Does Not Require Allocations or Envelopes or Ceilings: In November the Global Fund Board decided on an exciting new Strategy for 2012-2016. This includes a commitment to replace the "rounds" system with a more flexible and predictable model, which is urgently needed. However, this does not mean that the Fund should simply begin dividing-up current available funds country-bycountry based on some equation. Likewise, even country allocations based on disease and poverty that are designed to act as 'floors' that additional funding could be added to would act as ceilings - regardless of the intention of the model. This will have clearly negative consequences: instead of countries putting game-changing plans together and presenting these to the global community for support, countries will feel pushed to program according to the available insufficient budget. This is a model for failure in the fight against infectious disease pandemics.

We draw your attention to alternatives, including the attached points from civil society that could be the basis for a rational new funding model to meet the needs of changing times while retaining demand-driven focus (http://icssupport.org/home/call-on-the-global-fund-board). This can and should be implemented as discussions move ahead on urgently needed new funding windows in 2012 and 2013, but a top priority must be stoking, not limiting, ambition.

The Solution Is Flexible, Predictable Resource Models: If the problem is insufficient (and insufficiently predictable) donor funding then we call upon world leaders to create new replenishment mechanisms. The total unmet "demand" expressed to the Global Fund is little more than a rounding error in global budgets - temporarily insufficient funding should not mean abandoning the fight. Models that apportion the need among those who can pay, that allow for multiple pledging opportunities, and that promote peer-accountability among donors are how the global community ensures sufficient resources for its true priorities. Where are the serious proposals in this area?

This is a moment of reckoning: will the Board and will world leaders abandon their commitments to a new model of development with success within our grasp? Or will we all act together, with commitment, to end the crises of AIDS, TB, and malaria? We urge you to maintain your commitment.


Submission to the UK House of Commons International Development Committee for Its Evidence Session on the Global Fund to Fight AIDS, Tuberculosis and Malaria

by Bernard Rivers

[Abridged: full text available at
http://www.aidspan.org/aidspanpublications]

17 April 2012

Preface

Aidspan (http://www.aidspan.org) is an international NGO based in Nairobi, Kenya. Its mission is to reinforce the effectiveness of the Global Fund. Aidspan performs this mission by serving as an independent watchdog of the Fund, and by providing services that can benefit all countries wishing to obtain and make effective use of Global Fund financing.

...

Aidspan and the Global Fund maintain a positive working relationship, but have no formal connection. Aidspan does not allow its strategic, programmatic or editorial decisionmaking to be influenced by the Global Fund or by relationships with actual or potential funders. Furthermore, the Global Fund and Aidspan's funders bear no responsibility for the contents of any Aidspan publication.

Aidspan thanks the UK Department for International Development (DFID), The Monument Trust, Norad and Hivos for the support they have provided for 2012-2015 operations.

Bernard Rivers (Bernard.rivers@aidspan.org), author of this report, is the Executive Director of Aidspan.

More information on the UK House of Commons hearings can be found at http://tinyurl.com/6pa36tb

1.Background regarding the Global Fund

In April 2001, Kofi Annan declared that there should be a "war chest" of $7-10 billion per year to finance the fight against AIDS. He proposed that much of this should be raised, and then disbursed, by a "Global Fund."

Within less than a year, the Global Fund to Fight AIDS, Tuberculosis and Malaria (http://www.theglobalfund.org) went from concept to reality. The Global Fund opened its doors in January 2002 with the stated objective of dramatically increasing funding for the fight against three of the world's most devastating diseases.

The Global Fund provides about 20% of all international financing for AIDS, about 65% for tuberculosis and almost 60% for malaria. The Fund has approved over $22 billion in grants in 150 countries, and it estimates that programmes that it supports have saved over 8.6 million lives.

From the beginning, the Global Fund has had an astonishing range of supporters, from AIDS activists to US Republican Senators. This is largely because the Global Fund operates differently from traditional forms of foreign assistance: It uses a model that emphasizes control over grants by recipients, and it uses a business-like approach. The Global Fund's board includes not just donor governments, but also developing country governments, the private sector, foundations, non-governmental organisations (NGOs), and people living with the three diseases. The programmes to be funded are designed and run by the recipient countries, usually without the Global Fund telling them what it believes is in their best interest. Grant approvals are based purely on feasibility and technical merit, with no consideration given to ideological factors. With some grants, significant portions of the money are passed through to grass-roots NGOs. Overhead costs are kept to a minimum, with the Global Fund having no offices apart from the head office in Geneva. And the grants are "results-based," meaning that if the results promised by recipients are not delivered, the grant may be terminated and the money diverted to more effective programmes.

This no-nonsense, no-frills approach was aptly summarized by Richard Feachem, the Global Fund's first Executive Director, in six words: "Raise it. Spend it. Prove it." However, the sequence is really "Spend it. Prove it. Raise it." The Fund has to spend its money effectively. Then it has to prove that the expenditure had led to good results. Then it has to point to those results to persuade donors to give more.

2.Background regarding Aidspan

I am the founder and Executive Director of Aidspan (www.aidspan.org), an NGO which serves as an independent watchdog of the Global Fund. Aidspan has existed almost as long as has the Global Fund, and was set up in the belief that an organisation with as much money and power as the Global Fund needs ongoing scrutiny of its practices and results. I have had observer status at Global Fund board meetings since 2004; I have known most of the Fund's senior managers and many of its board members; and I have visited many Global Fund-financed projects in the field. Aidspan's activities include publishing Global Fund Observer (GFO), a free email-based newsletter which has nearly 10,000 subscribers. Aidspan has a dozen staff and is based in Kenya.

In November 2011, DFID committed to provide Aidspan with 1.3 million British pounds spread over the subsequent four years. This funding will cover about 22% of our budget during that period.

Aidspan does not allow its strategic, programmatic or editorial decision-making to be influenced by the Global Fund or by relationships with actual or potential funders. Thus, neither the Global Fund nor DFID was consulted regarding the contents of this testimony.

In brief, Aidspan's attitude is that the Global Fund is a unique and crucial institution, and we want nothing more than for it to be successful and effective. And we admire donors such as the UK that are willing to "put their money in the Global Fund pot" without requiring that their money is earmarked for particular countries or projects.

Over the years, the Global Fund has performed quite well. But any institution can improve its impact by 10%, or 5%, or surely 1%. It is those possible improvements that we look for.

3. 2011, the Global Fund's worst year

The Global Fund recently celebrated its tenth anniversary. The year 2011, which ended with the Fund's Board forcing the Executive Director to resign, was the Fund's most difficult to date.

The stage was set for the Global Fund's problem-filled 2011 when the Fund said in late 2010 that it needed $13-20 billion to meet anticipated demand for 2011-2013 (up from the $9.3 billion it received during 2008-2010), but donors pledged only $11.7 billion.

Then in January 2011 the Associated Press published an article entitled "Fraud Plagues Global Health Fund," based on public reports from the Global Fund's Office of the Inspector General (OIG). The story took off like wildfire. Alarmed, some of the Global Fund's donors held back on delivering their promised contributions pending clear action by the Fund to deal with fraud.

The OIG's findings on fraud, although much less significant than was suggested by the AP, were obviously important and required action. But the OIG made little distinction between outright fraud and multiple lesser crimes (such as grant recipients documenting their expenditure using photocopies rather than originals). These and other instances of OIG rigidity led to a very difficult relationship between the OIG and Secretariat.

Somewhat shell-shocked by the media and donor response, the already risk-averse Global Fund further tightened its procedures, leading for a while to a slow-down in disbursements. Even when implementers received their disbursements, they were sometimes nervous about spending the money for fear that they would inadvertently violate some Global Fund rule.

Meanwhile, the Fund set up a High Level Panel to review how the Fund identifies and manages risk in its grant-making. The Panel issued a report in September that was daunting in terms of the number of things it said need fixing.

The downhill trajectory continued when the Global Fund, having launched "Round 11" (its eleventh round of grantmaking) in August 2011, cancelled it three months later because of inadequate funding.

Then came a final nose-dive when the Global Fund Board, after reviewing the events of the prior year and conducting an in-depth assessment of the managerial performance of the Fund's then Executive Director (ED), concluded that he had to go. After the ED ignored strong suggestions that he resign, the Board resolved to appoint a General Manager to whom all top management would report, leaving behind a role for the ED that was "to be determined." For two months, the Global Fund floundered almost leaderless. Of the seven members of the Executive Management Team that ran the Secretariat, only three were present and productively engaged during this period.

...

Finally, on 24 January 2012, the ED announced his intention to resign. On the same day, the Fund announced that the new position of General Manager would be filled by Gabriel Jaramillo, a former banker who specialises in management and turn-rounds and who had served on the High Level Panel.

4. What needs to change

The Global Fund performs vital work affecting millions of lives. The Fund cannot afford to have a second year like 2011, and might be permanently damaged if it did. Here are six areas in which, in my view, changes need to be implemented.

(a)The Global Fund must install first-class management

The recently-departed Executive Director's managerial misjudgements started several years ago, when his approach led to several highly-capable department heads leaving the Fund, and when some of the new department heads he recruited were disappointingly weak. This led, over time, to serious reductions in morale and effectiveness lower down in the organisation.

Both of the Executive Directors that the Global Fund has hired over its first decade were charismatic leaders; but neither had much interest or natural skill in the art of management. The Global Fund is not an entrepreneurial startup or a university department or a think tank. It is a vast meat-grinder that disburses $3 billion annually, employing 600 staff and working its way through an administrative budget of $370 million. It needs to be led by managerial heavy-hitters.

Current state of play: Since the start of February, the Global Fund has been led by Gabriel Jaramillo. He certainly hit the ground running. He has removed some members of top management; he has informed 140 of the 667 staff that their jobs have been eliminated; and he has created 82 new jobs in the area of grant management. There have been some complaints about how some aspects of this were handled, but that is hardly surprising. By definition, it's too soon to know what the net effect will be. But the decision-making has been both firm and speedy.

(b) The Global Fund must become less bureaucratic

The Global Fund needs to turn away not only from its pre-2011 attitude (which was, at least in the earlier years, "here's lots of money - get on with it") but also from its OIG- inspired 2011 attitude (which was "don't forget to submit all those workshop sign-up sheets"). The OIG's job is to identify fraud and, where possible, to eliminate it; in other words, it is to minimise risk. Mr Jaramillo's job is to maximise the number of lives saved as the result of the Global Fund's grants. This requires, among many other things, risk-management; but that is not the same as riskminimisation. Thus, there is an inevitable tension between the OIG's role and the General Manager's role.

Putting this a different way, the Global Fund needs to shift from being a "cashier demanding receipts" to being "an investor demanding results". The cashier/receipt mentality, triggered primarily by the work of the OIG, has led to excessive bureaucracy and minimal trust. The investor/results mentality can lead to greater trust and more impact. But of course, excessive trust can be abused; there must be verification.

Furthermore, a strong case can be made that what should be verified is the number of people with improved health, not bean-counter items like the number of people attending workshops.

If the Fund can succeed in making these shifts, it can become less bureaucratic, and there's even a chance that it could achieve the long-lost vision that it promoted in 2002 ??" "simplified, rapid, innovative and efficient."

Current state of play: It's too soon to know whether the Global Fund will succeed.

(c) The Global Fund must explain itself more clearly

The requirements that developing countries have to follow when applying for or implementing Global Fund grants are very complex. This is to a large extent inevitable; you can't expect just a two-page application form if you're applying for tens or hundreds of millions of dollars.

But the fact remains that the Global Fund does a terrible job of explaining itself to the world. Why is it that "The Beginner's Guide to the Global Fund" (which is available in a 50-page version and in 8-page and 2-page summary versions) was written and published by my own organisation, Aidspan, rather than by the Global Fund? Why is it that nearly 10,000 people have to subscribe to our newsletter Global Fund Observer (GFO) in order to learn about developments that the Global Fund has not explained, or has explained in a confusing manner?

Even the Fund's press releases have at times been confusing. When the Global Fund had to cancel Round 11, the Fund's press release did not mention the words "cancel" or "Round 11". Just as bad, the Fund did not make it clear that over the previous year, donors had not reduced or cancelled their pledges to the Fund, as was widely believed. The primary cause of the abrupt reversal regarding Round 11 was the Fund's fear that donors might reduce or cancel their pledges, either because of donor concerns about Global Fund problems, or because of the economic difficulties that many donors were experiencing. The Fund therefore introduced a more conservative forecasting methodology, which led it to estimate that it could only be sure of about $10 billion in income during 2011??"2013, rather than the approximately $11.5 billion that it had originally projected. A significant factor here was that the Fund was not sure that the US would contribute the full $4 billion over three years that the US had announced in 2010. (In fact, it's now looking increasingly likely that the full $4 billion will be provided by the US.) The reduction in the Global Fund's revenue forecast from $11.5 billion to $10 billion over three years may not sound large; but it had a drastic impact, because the $1.5 billion reduction was almost exactly equal to the anticipated cost of Round 11. And the Board had long since determined ??" rightly ??" that new grants (such as would have been provided under Round 11) have to be assigned a lower priority than keeping existing grants going. At the time of the cancellation of Round 11, the Global Fund knew that the costs during 2011-2013 of continuing and renewing its existing grants came to about $10 billion. Which left no certain money for Round 11.

Yes, this is modestly complicated. But an organisation that handles many billions of dollars ought to be willing and able to explain such matters clearly. The fact that the Fund did not do so left much confusion within the Global Fund community.

Current state of play: The Global Fund is looking for a new Communications Director. Maybe that will lead to better press releases. But I've seen no evidence that the Fund plans to improve the clarity and effectiveness of its broader communications with the thousands of people who are involved in applying for and implementing its grants.

(d) The Global Fund must determine whether its grants are more susceptible to fraud than are those of other international donors

The January 2011 AP story that started the Global Fund's terrible year was based on fraud identified by the OIG (and reported at the Fund's website) in just four small countries out of the 150 that receive Global Fund grants. Yet the story had the unproven headline "Fraud Plagues Global Health Fund."

What the Global Fund should have done - and it's not too late - is to commission an independent group of experts to estimate, based on the available data, how extensive fraud is across the entire Global Fund grant portfolio. The question is not is there fraud?; it is how persistent is fraud? And the follow-up question is: how does the Fund's fraud problem compare with that of other multilateral and bilateral funding agencies?

Of course, that second question will be very hard to answer, because no international funding agency - not the World Bank, not DFID, not USAID, not anybody - is as transparent as the Global Fund is about the fraud it unearths. Indeed, I sometimes think - perhaps unfairly - that some agencies would prefer not to know, let alone to publish, which of their grants have led to some leakages through fraud.

(e) The Board of the Global Fund must be made leaner and more effective

The Global Fund needs a smaller board made up only of members who are competitively chosen, who spend some years in the role, who fully prepare for and attend all board and relevant committee meetings, who become accustomed to working with each other, and who each accept personal accountability for the results. This is how it is done in the corporate world, and it usually works. If this requires some board members to be paid, that option should be considered.

At present, some board members who represent multiple countries are chosen by those countries based on each country's position in the alphabet. These board members, and certain others, are often insufficiently informed and engaged. This has led to a board that focuses on a mix of putting out fires (which is clearly necessary) and micromanaging the Secretariat (which is not). There is a huge middle area - involving thinking proactively about areas of risk and of potential improvement - that hardly ever gets discussed. The Board is only rarely a source of strength. It needs to become one on a permanent basis.

Current state of play: Over the last few months, the Global Fund has redesigned its board committee structure. And its Audit and Ethics Committee now has a majority of its members who are independent of all board delegations. These are encouraging developments. But I've seen no sign yet of plans to reduce the size of the board, to increase the calibre of its membership, or to improve the quality of its discourse.

(f) The Global Fund must re-examine certain aspects of its transparency policy

Two admirable components of the Global Fund model - an OIG that is determined to root out fraud, and a world-class transparency policy - have produced, when combined, some unanticipated consequences. The OIG discovered fraud among certain grant implementers; the Global Fund posted the findings at its website rather than hiding them in a safe as most aid agencies do; the press went wild; Global Fund donors worried about how their taxpayers would feel about funding grants for corrupt implementers; donor pledges were put on hold; and Global Fund growth stalled. This cycle will repeat itself unless the Board is able to devise a policy that permits the Fund to better manage the repercussions of transparency without sacrificing the underlying principle.

Current state of play: By the end of 2011, the OIG was supposed to have completed at least 48 country-level audits. But thus far, it has only published reports on 20 of these. It has published no reports during the past six months. I imagine that this is not just the result of over-work; it is the result of trying to work out how to have audit and investigation reports that are transparent but that don't lead to firestorms.

5.Two lingering concerns

I have a concern that under Mr Jaramillo, with his corporate numbers-oriented background, the Global Fund may start insisting that each of its grants demonstrates measurable impact, rapid results, high value for money and low risk. At first, that sounds eminently sensible. But if such an approach is implemented, the Global Fund will change significantly. The Fund will have to reduce its grants for health systems strengthening (because the payback from such investments in terms of lives saved is indirect and delayed and therefore hard to measure). It will have to reduce its grants to countries with weak data systems (because those countries can't compile reliable data proving the lives saved). It will have to reduce its grants to countries with weak governance (because the risk of "grant leakages" will be too great). And it will have to reduce its grants to countries with low total burden of disease (because the Fund's overhead per life saved in such countries will be higher than in high-impact countries).

I also have a concern that the Global Fund will shift towards an "allocative model", in which it determines in advance a maximum amount of money to give to each country, based on the burden of disease in that country and the amount of funding available in that country from other sources, including the country's own government. Again, at first that sounds eminently sensible, and certainly it should be given serious consideration. But such an approach would, again, lead the Global Fund to change significantly. The Fund's traditional model has involved a "bottom up" approach, in which each country decides its priorities and how to achieve them programmatically, and then makes a case to the Global Fund for what areas need support. If the Global Fund goes for an allocative model, there is a risk that the Fund could become more of a "top down" organisation which decides not only how much money it wants to give to each country, but what kinds of projects it wants that money to finance. This is much closer to the traditional bilateral aid model; but it is not the traditional Global Fund model.

6. Looking forward

So where now? The Board has asked Mr Jaramillo to serve not only as General Manager for up to a year, but also as the Global Fund's interim leader until a global search for a new Executive Director is launched and completed. Mr Jaramillo's current task is to get the currently somewhat dysfunctional and traumatised Secretariat rapidly up to speed.

There's a real chance that the difficulties of the past year will end up being seen as the darkness before the dawn. If the Global Fund can push out its Executive Director, hopefully it is also willing to make other important though less dramatic changes. The Fund could take inspiration from the GAVI Alliance (formerly, the Global Alliance for Vaccines and Immunisation). In mid-2010, GAVI went through a major management overhaul, which included the departure of its CEO and the appointment of a new one six months later. Then GAVI announced in early 2011 that it had suspended grants to four countries because of suspected fraud. Yet in mid-2011, donors committed 15% more funding than GAVI had asked for. It can happen.


AfricaFocus Bulletin is an independent electronic publication providing reposted commentary and analysis on African issues, with a particular focus on U.S. and international policies. AfricaFocus Bulletin is edited by William Minter.

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