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entitled 'Global Health: Global Fund to Fight AIDS, TB and Malaria Has 
Improved Its Documentation of Funding Decisions but Needs Standardized 
Oversight Expectations and Assessments' which was released on May 7, 
2007. 

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Report to Congressional Committees: 

United States Government Accountability Office: 

GAO: 

May 2007: 

Global Health: 

Global Fund to Fight AIDS, TB and Malaria Has Improved Its 
Documentation of Funding Decisions but Needs Standardized Oversight 
Expectations and Assessments: 

GAO-07-627: 

GAO Highlights: 

Highlights of GAO-07-627, a report to congressional committees 

Why GAO Did This Study: 

The Global Fund to Fight AIDS, Tuberculosis and Malaria has approved 
about $7 billion in grants to developing countries; the U.S. has 
contributed $1.9 billion. The State Department’s Office of the Global 
AIDS Coordinator (OGAC) coordinates the U.S. government’s overseas AIDS 
programs, with participation from the Department of Health and Human 
Services (HHS) and the U.S. Agency for International Development 
(USAID). In 2003, Congress directed GAO to report on the Global Fund 
every 2 years. This report assesses the Global Fund’s (1) documentation 
of information used to support performance-based funding decisions, (2) 
progress in implementing a risk assessment model and early warning 
system, and (3) oversight of the performance of “local fund agents” 
(LFAs), which monitor grant progress in recipient countries. GAO 
reviewed the documentation for funding decisions and interviewed key 
officials. 

What GAO Found: 

Since our 2005 review, the Global Fund has improved its documentation 
for decisions to disburse funds and renew grants. The Global Fund now 
requires that fund portfolio managers more consistently document 
factors, such as grant ratings and contextual information that support 
disbursement and grant renewal decisions. Our current review of 80 
grant disbursements and 45 grant renewal decisions confirmed that 
Global Fund grant files consistently contained explanations of the 
information used in its funding decisions. For example, all grant 
disbursement files in our sample contained a written narrative 
explaining the ratings that portfolio managers gave the grants, based 
in part on reports completed by grant recipients. Although we noted 
that many of the grant recipients’ reports lacked some information 
needed for disbursement and renewal decisions, Global Fund officials 
said that portfolio managers obtain this information informally from 
the recipients or other stakeholders. 

The Global Fund did not implement the risk assessment model that it was 
developing at the time of our 2005 report, because it determined that 
the model did not accurately identify grant risk. To identify risks 
that may affect grant implementation, the organization currently relies 
on elements of its structures and processes, including its initial 
technical review, disbursement decision-making form, periodic grant 
ratings, oversight by country stakeholders, information from technical 
partners, and LFA oversight. Recognizing the need for a more 
comprehensive approach to risk management, the Global Fund has begun 
developing a risk assessment framework for the organization that 
includes an early alert and response system to address poorly 
performing grants. 

The Global Fund has limited access to the information it needs to 
manage and oversee LFAs because it does not require systematic 
assessments of LFAs’ performance. As a result, the Global Fund has 
limited ability to determine the quality of LFAs’ monitoring and 
reporting and to identify situations in which more oversight of LFAs’ 
performance may be required. Previously, the Global Fund introduced a 
tool to assess LFA performance more systematically; however, this 
effort was unsuccessful, because use of the tool was not mandatory. 
Numerous sources raise concerns about the quality of grant monitoring 
and reporting provided by LFAs, particularly their ability to assess 
and verify recipients’ procurement capacity and program implementation. 

What GAO Recommends: 

We recommend that the Secretaries of State and Health and Human 
Services work with the Global Fund’s Board Chair and Executive Director 
to (1) establish standardized expectations for LFA performance and (2) 
require systematic assessments of LFA performance and the collection 
and analysis of performance data. The Departments of State and HHS, 
USAID, and the Global Fund agreed with our findings and 
recommendations. 

[Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-07-627]. 

To view the full product, including the scope and methodology, click on 
the link above. For more information, contact David Gootnick at (202) 
512-3149 (gootnickd@gao.gov). 

[End of section] 

Contents: 

Letter: 

Results in Brief: 

Background: 

Global Fund Has Improved Documentation of Its Basis for Funding 
Decisions: 

Global Fund Did Not Implement Earlier Risk Model but Is Developing 
Comprehensive Risk Framework That Includes Early Alert and Response 
System: 

Global Fund Has Limited Ability to Manage and Oversee Local Fund 
Agents' Performance: 

Conclusions: 

Recommendations for Executive Action: 

Agency Comments: 

Appendix I: Objectives, Scope, and Methodology: 

Appendix II: Other Sources Cited: 

Appendix III: Comments from the Global Fund: 

Appendix IV: Comments from Departments of State and Health and Human 
Services and U.S. Agency for International Development: 

Appendix V: GAO Contact and Staff Acknowledgments: 

Table: 

Table 1: Key Source Documents for Disbursement and Grant Renewal 
Decisions: 

Figures: 

Figure 1: Global Fund Allocations between 2002 and 2006 by Geographical 
Region and Disease: 

Figure 2: Global Fund Allocations by Disease and Intervention Category: 

Figure 3: Performance-based Funding Oversight by Global Fund 
Secretariat, Grant Recipients, and LFAs: 

Figure 4: Global Fund Disbursement Decision Process: 

Figure 5: Key Elements of the Global Fund's Phase 2 Grant Renewal 
Process: 

Abbreviations: 

CCM: country coordinating mechanism: 
HHS: Department of Health and Human Services: 
HIV/AIDS: human immunodeficiency virus/acquired immune deficiency 
syndrome: 
LFA: local fund agent: 
OGAC: Office of the U.S. Global AIDS Coordinator: 
TB: tuberculosis: 
UNAIDS: Joint United Nations Programme on HIV/AIDS: 
USAID: United States Agency for International Development: 
WHO: World Health Organization: 

United States Government Accountability Office: 
Washington, DC 20548: 

May 7, 2007: 

The Honorable Joseph R. Biden, Jr. 
Chairman: 
The Honorable Richard G. Lugar: 
Ranking Minority Member: 
Committee on Foreign Relations: 
United States Senate: 

The Honorable Tom Lantos: 
Chairman: 
The Honorable Ileana Ros-Lehtinen: 
Ranking Minority Member: 
Committee on Foreign Affairs: 
House of Representatives: 

The Global Fund to Fight AIDS, Tuberculosis and Malaria (the Global 
Fund) was created to help finance the fight against three infectious 
diseases that kill more than 6 million people each year. Established in 
2002, the Global Fund is a private foundation intended as a partnership 
among governments, civil society, the private sector, and affected 
communities. From 2002 through February 2007, the Global Fund approved 
grant proposals totaling about $7 billion to governmental and 
nongovernmental entities to carry out disease intervention activities 
in more than 100 countries. During this period, the U.S. government 
contributed $1.9 billion--the largest amount provided to the Global 
Fund by a single donor. The State Department's Office of the Global 
AIDS Coordinator (OGAC) coordinates the U.S. government's overseas AIDS 
programs, with participation from the Department of Health and Human 
Services (HHS) and the U.S. Agency for International Development 
(USAID). 

The Global Fund uses a performance-based funding system designed to 
encourage financial accountability and program progress and to link its 
continued grant disbursements to achievement of these results. The 
Global Fund contracts with "local fund agents" (LFA) to assess 
recipients' capacity for grant implementation and verify recipients' 
financial and program performance data. In June 2007, it plans to issue 
applications for new contracts for LFA oversight services. 

In 2003, Congress directed the Comptroller General to monitor and 
evaluate projects supported by the Global Fund and to submit a report 
every 2 years.[Footnote 1] In June 2005, we reported that the Global 
Fund's grant documentation did not always show clear grounds for 
performance-based funding decisions. [Footnote 2] These decisions can 
include periodic disbursements as well as decisions to renew, suspend, 
or terminate grants. We further noted that some of the grant 
recipients' self-reported performance data were of poor quality or 
incomplete. We also reported that the Global Fund was developing a risk 
assessment model and early warning system to alert its fund portfolio 
managers to the need to respond to poorly performing grants.[Footnote 
3] In addition, we noted that LFAs' assessments of recipient 
performance contained inconsistencies and that LFAs often lacked the 
knowledge and experience needed for these assessments. In its response 
to our 2005 report, the Global Fund generally concurred with our 
findings and indicated that it was taking steps to improve its 
structures and systems. 

Following up on our 2005 review, this report assesses the Global Fund's 
(1) documentation of the information used to support performance-based 
funding decisions, (2) progress in implementing a risk assessment model 
and early warning system, and (3) oversight of local fund agents' 
performance. 

To address these objectives, we met with key officials from the Global 
Fund and reviewed Global Fund documents, including key source documents 
from grant files. To assess the documentation of the information used 
to support performance-based funding decisions, we analyzed two 
separate random samples of grant decisions from the Global Fund. The 
first sample consisted of 80 grants that were assessed for performance- 
based funding disbursements between January 1 and October 1, 2006. The 
second sample consisted of 45 grants that were assessed for phase 2 
grant renewal.[Footnote 4] We projected our findings to the files of 
all grants that received a disbursement or were assessed for grant 
renewal during that period. To assess Global Fund progress in 
implementing a risk assessment model and early warning system, we 
reviewed international standards on risk management,[Footnote 5] met 
with Global Fund secretariat officials, and reviewed Global Fund 
documents. We also held discussions with the Global Fund's Inspector 
General and three of its key technical partners.[Footnote 6] To assess 
the Global Fund's oversight and measurement of LFAs' capacity and 
performance, we met with each of the six LFA headquarters offices and 
relevant secretariat personnel. In addition, we held structured 
interviews with LFA teams in 12 countries via telephone. We also 
obtained perspectives on the progress of the Global Fund from its 
partners and outside experts. We conducted our work between May 2006 
and March 2007 in accordance with generally accepted government 
auditing standards. (See app. I for a detailed description of our scope 
and methodology.) 

Results in Brief: 

The Global Fund has improved its documentation of information that 
supports its performance-based funding decisions for disbursements and 
grant renewals. Since our 2005 review, the Global Fund has updated its 
documentation system to require that portfolio managers more 
consistently document factors, such as grant ratings and contextual 
information, on which they base their decision to continue funding a 
grant.[Footnote 7] Our review of 80 grant disbursements and 45 phase 2 
grant renewal decisions confirmed that Global Fund grant files 
consistently contained explanations of the information used to make its 
funding decisions.[Footnote 8] For example, 100 percent[Footnote 9] of 
the disbursement and phase 2 files in our samples contained narratives 
explaining the manager's rating of the grant's performance. We noted 
that many reports completed by grant recipients lacked explanations 
either for not meeting or for exceeding the grant's targets. However, 
Global Fund officials said that fund portfolio managers obtain the 
needed information informally from the recipients or other 
stakeholders. 

The Global Fund did not implement the risk assessment model that it was 
developing at the time of our 2005 report, because it determined that 
the model did not accurately identify grant risk. To identify risks 
that may affect grant implementation, the organization currently relies 
on elements of its structures and processes, including its initial 
technical review, disbursement decision-making form, periodic grant 
ratings, oversight by country stakeholders, information from technical 
partners, and LFA oversight. Recognizing the need for a more 
comprehensive approach to risk management the Global Fund has begun 
developing a risk assessment framework for the organization that 
includes an early alert and response system to address poorly 
performing grants. 

Because it does not require systematic assessments of LFAs' 
performance, the Global Fund has limited access to the information it 
needs to manage and oversee LFAs.[Footnote 10] Global Fund portfolio 
managers set expectations for LFA performance informally and 
individually, often resulting in, for example, variances in scopes of 
work and definitions of satisfactory performance. Moreover, the Global 
Fund does not require systematic assessment or reporting of LFAs' 
performance; instead, managers provide feedback to LFAs informally. 
Because of the lack of systematic assessment, the Global Fund has 
limited ability to determine the quality of grant services provided by 
LFAs and to identify situations in which more oversight of LFAs by the 
Global Fund may be required. The Global Fund previously introduced a 
tool to assess LFA performance more systematically. However, this 
effort was unsuccessful because use of the tool was not mandatory. 
Numerous sources raise concerns about the quality of grant oversight 
provided by LFAs, particularly their ability to assess and verify 
recipients' procurement capacity and program implementation. 

To improve the Global Fund's ability to oversee the performance of its 
local fund agents, we recommend that the Secretaries of State and HHS 
work with the Global Fund's Board Chair and Executive Director to (1) 
establish standardized expectations for LFA performance; and (2) 
require systematic assessments of LFA performance and the collection 
and analysis of performance data. 

In responding to our draft report, the Departments of State and Health 
and Human Services, the U.S. Agency for International Development, and 
the Global Fund agreed with the report's findings, conclusions, and 
recommendations. (See apps. III and IV for their comments.) 

Background: 

The Global Fund, a private foundation in Switzerland, was established 
in 2002 as a funding mechanism to collect public and private 
contributions to finance grants for the prevention and treatment of 
HIV/AIDS, tuberculosis (TB), and malaria.[Footnote 11] About 96 percent 
of the contributions to the Global Fund since its inception have come 
from governments. Private sector support increased in 2006, notably 
owing to a pledge of $500 million by the Bill and Melinda Gates 
Foundation and receipt of almost $19 million through the (RED)™ 
initiative.[Footnote 12] 

By December 2006, the Global Fund had completed six proposal rounds, 
approved about $7 billion in grants, signed grant agreements worth over 
$5 billion and disbursed more than $3 billion to grant recipients in 
132 countries. The Global Fund also reports that by December 2006, its 
grants enabled recipients to supply antiretroviral drugs to 770,000 
people infected with HIV/AIDS, treat 2 million people infected with 
tuberculosis, and distribute 18 million insecticide-treated nets to 
combat malaria. 

Global Fund Portfolio Distribution: 

The Global Fund's underlying principles require, among other things, 
that it maintain a balanced grant portfolio in terms of region, 
disease, and type of intervention; operate transparently and 
accountably; and use a simple, rapid, and innovative grant-making 
process.[Footnote 13] As figure 1 shows, between 2002 and 2006, the 
Global Fund distributed 55 percent of grant funds to sub-Saharan 
Africa, with the remainder of the funding divided among other regions 
of the world. Also during this time period, the Global Fund distributed 
57 percent, 15 percent, and 27 percent of grant funds, respectively, 
for HIV/AIDS, tuberculosis, and malaria programs. The remaining 1 
percent funded projects to strengthen health systems. 

Figure 1: Global Fund Allocations between 2002 and 2006 by Geographical 
Region and Disease: 

[See PDF for image] 

Source: GAO analysis of Global Fund data. 

[End of figure] 

In 2005, the Global Fund began tracking the allocation of grant funds 
in grant proposals according to the disease intervention categories of 
prevention, care, and treatment. Figure 2 shows the Global Fund's 
estimated distribution by disease and intervention category. 

Figure 2: Global Fund Allocations by Disease and Intervention Category: 

[See PDF for image] 

Source: GAO based on Global Fund Round 5 data from 2006. 

[A] For HIV/AIDS, "Other" includes grants for health system 
strengthening, monitoring and evaluation, supportive environment, 
HIV/TB collaborative activities, and other activities. 

[B] For tuberculosis, "Other" includes grants for health system 
strengthening, monitoring and evaluation, supportive environment, and 
other activities. 

[C] For malaria, "Other" includes grants for health system 
strengthening, supportive environment, and other activities. 

[End of figure] 

Key Elements of the Global Fund's Structure: 

The Global Fund's principles also require it to focus on performance by 
linking its resources to the achievement of clear, measurable, and 
sustainable results. To achieve this focus on performance-based 
funding, the Global Fund relies primarily on oversight by, and 
interaction among, Global Fund secretariat personnel,[Footnote 14] 
grant recipients, and LFAs. (See fig. 3.) 

Figure 3: Performance-based Funding Oversight by Global Fund 
Secretariat, Grant Recipients, and LFAs: 

[See PDF for image] 

Sources: GAO(data); Map Resources (clip art). 

[A] Fund portfolio managers also have formal relationships with grant 
recipients and they interact with all stakeholders including LFA 
central teams: 

[End of figure] 

* Global Fund secretariat personnel. Within the secretariat, the fund 
portfolio managers are primarily responsible for reviewing grant 
progress and making performance-based funding recommendations. Other 
secretariat personnel are consulted during key stages in the grant life 
cycle. Fund portfolio managers interact with the LFA country teams 
providing oversight services for their grant, as well as with principal 
recipients, subrecipients, technical partners, and other stakeholders 
in the recipient countries. In addition to the country teams, staff 
from the contracts department and the Global Fund's LFA manager 
interact with LFA headquarters teams, known as the central teams, 
regarding contracting and administrative matters and any problems 
related to LFA country teams. 

* Grant recipients. At the country level, the principal grant recipient 
is responsible for receiving and implementing the grant.[Footnote 15] 
During implementation, the principal recipient is responsible for 
monitoring and evaluating the grant's effectiveness in accordance with 
grant objectives and making sure that funds are properly accounted for. 
The principal recipient is also responsible for overseeing the 
activities of any subrecipients implementing grant activities. 

* Local fund agents. The Global Fund currently contracts with LFA 
headquarters central teams at six organizations[Footnote 16] to oversee 
grants in 120 countries and multicountry programs.[Footnote 17] In the 
majority of cases, the central team establishes interfirm agreements 
with its affiliated offices within each country to perform LFA 
services.[Footnote 18] The LFA assesses recipient capacity prior to 
grant signing and performs verification and oversight duties throughout 
the life of the grant. The LFA central teams typically contract with 
external specialists for work outside the expertise of their 
organization, especially during the initial assessments of recipient 
capacity. For example, during the initial assessments, some 
organizations contract with a procurement expert to review recipients' 
capacity for procurement and supply chain management. The Global Fund 
budgeted approximately $22 million--26 percent of the secretariat's 
operating budget--to support the LFA structure for 2006 and spent about 
an additional $320,000 on LFA-related functions, including personnel 
costs related to LFA management, studies of the LFA model, and travel 
to meet with LFAs. 

Performance-Based Funding Process: 

The Global Fund's performance-based funding process involves an initial 
assessment of recipients' capacity to manage and implement grants, 
periodic disbursement decisions based largely on reports by the grant 
recipient and the LFA, and a phase 2 grant renewal review after about 2 
years. 

* Assessment of grant recipients' capacity. Prior to funding a grant, 
the Global Fund considers, among other things, a grant recipient's 
ability to (1) manage, evaluate, and report on grant-funded activities; 
(2) manage and account for funds; and (3) procure goods and services. 
LFAs assess prospective recipients' capacity to perform these 
activities. Funding is conditioned on recipients' meeting performance 
targets mutually agreed with Global Fund technical experts. 

* Periodic disbursements. After the initial screening and approval 
process, the grant recipient must produce quarterly or semi-annual 
reports describing financial and program progress as well as a funding 
request for the next disbursement period. The grant recipient sends 
these reports to the LFA, which prepares a report verifying the 
accuracy of the information, identifying potential grant problems, 
rating grant performance, and recommending a disbursement amount. The 
LFA then forwards the grant recipient's report and its own report to 
the designated Global Fund portfolio manager. The fund portfolio 
manager compares the financial information and data on program progress 
with the grant's performance targets, taking into account information 
such as the status of procurements and political or economic 
constraints. The fund portfolio manager's team leader makes a funding 
decision if the disbursement is less than $2 million.[Footnote 19] 
Figure 4 illustrates the Global Fund's periodic disbursement decision 
process. 

Figure 4: Global Fund Disbursement Decision Process: 

[See PDF for image] 

Source: GAO (data); Map Resources (clip art). 

[End of figure] 

* Grant renewal process. A key milestone in the performance-based 
funding approach is the phase 2 grant renewal review--a detailed 
analysis of grant progress at about 2 years, required to continue 
funding for up to the next 3 years. Similar to its process for 
disbursement decisions, the Global Fund's grant renewal process 
requires grant recipients to send documentation of financial and 
program progress to the LFA, which verifies the information and 
analyzes the phase 2 proposal. In a report to the Global Fund, the LFA 
identifies potential grant problems, rates the performance of the 
grant, and recommends the amount needed to fund up to the next 3 years 
of the grant. Because phase 2 is the decision point for continuing the 
grant to its 5-year completion, the process also includes an extensive 
and detailed review of cumulative information by fund portfolio 
managers, their supervisors, and evaluation and finance staff. The 
phase 2 renewal process culminates in a panel discussion and final 
recommendation to the board. Figure 5 illustrates key elements of the 
Global Fund's phase 2 grant renewal process. 

Figure 5: Key Elements of the Global Fund's Phase 2 Grant Renewal 
Process: 

[See PDF for image] 

Sources: GAO (data); Map Resources (clip art). 

[End of figure] 

Table 1 outlines the key source documents related to disbursement 
decisions and phase 2 grant renewals from electronic "grant files" that 
we reviewed in conducting this study. 

Table 1: Key Source Documents for Disbursement and Grant Renewal 
Decisions: 

Disbursement. 

Reporting form: Progress Update and Disbursement Request; 
Completed by: Grant recipient. 

Reporting form: LFA Progress Review and Recommendation; 
Completed by: LFA. 

Reporting form: Disbursement Decision- Making Form; 
Completed by: Global Fund secretariat. 

Phase 2 renewal. 

Reporting form: Request for Continued Funding; 
Completed by: Country coordinating mechanism (CCM). 

Reporting form: Grant Performance Report; 
Completed by: Global Fund secretariat. 

Reporting form: Phase 2 Request Assessment Report; 
Completed by: LFA. 

Reporting form: Grant Scorecard; 
Completed by: Global Fund secretariat. 

Source: GAO analysis based on Global Fund documentation. 

[End of table] 

In preparation for its retender of LFA contracts worldwide in mid to 
late 2007, the secretariat will continue discussions on the key 
principles that will potentially shape the design of the next LFA 
model. According to a Global Fund official, they will take into 
consideration findings from this review and two internal Global Fund 
studies. They expect to issue the request for applications in late 
June. 

Global Fund Has Improved Documentation of Its Basis for Funding 
Decisions: 

The Global Fund has improved its documentation of information 
supporting its performance-based funding decisions. For example, the 
Global Fund's system now requires that portfolio managers consistently 
document factors that may affect the decision to continue funding a 
grant, especially when the grant falls short of its performance 
targets. In addition, the Global Fund grant files that we reviewed 
consistently contained explanations of funding decisions and contextual 
data informing the decisions. Although we found many reports submitted 
by grant recipients to the Global Fund do not provide explanations for 
all unmet grant performance targets, according to Global Fund 
officials, fund portfolio managers are able to obtain the needed 
information directly from the grant recipients or other stakeholders. 

Global Fund Has Improved Its Processes for Documenting the Basis for 
Funding Decisions: 

The Global Fund has developed a more systematic process for documenting 
the basis for its funding decisions. In June 2005, we noted that the 
Global Fund did not consistently document the reasons for its 
determinations that recipients' performance warranted additional 
funding for periodic disbursements or its recommendations regarding 
grant renewals. We recommended that the Global Fund continue efforts to 
clearly document the Global Fund's reasons for periodically disbursing 
funds and renewing grant agreements. Subsequently, to increase the 
transparency of its performance-based funding system, the organization 
made several changes to its documentation process. 

In late 2005, the Global Fund developed a disbursement decision-making 
form to ensure that fund portfolio managers consistently show the basis 
for each disbursement decision. The form requires, among other things, 

* an explanation of the performance rating assigned to the grant, 
addressing any discrepancy between ratings by the fund portfolio 
manager and the LFA and verifying that the manager has considered any 
problems raised by the LFA regarding data quality and reporting, 
program progress, and expenditures;[Footnote 20] and: 

* contextual information critical to the disbursement decision, such as 
information demonstrating governance problems, grant management 
weaknesses, currency fluctuations, or natural disasters in the country 
or region where a funded project is being implemented. 

The Global Fund also revised other forms to provide more systematic 
reporting of grant program progress. These revisions included 
improvements to the grant progress update and disbursement request, the 
LFA progress review and recommendation report, and the phase 2 grant 
scorecard.[Footnote 21] For example, the updated progress update form 
contains a new requirement that LFAs comment on the reliability of 
grant recipient data on target achievement. The updated grant scorecard 
includes requests for data showing the timeliness and effectiveness of 
grant recipients' use of the funds during phase 1 of grant 
implementation. It also includes a new section where the secretariat 
can record plans to materially change the grant in phase 2--for 
example, adding or dropping goals or objectives because of lessons 
learned during phase 1.[Footnote 22] 

According to Global Fund officials, the changes to their system of 
recording information about grant performance and problems have made 
the decision process more systematic and transparent. For example, 
Global Fund officials, including some fund portfolio managers, said the 
new disbursement decision-making form provides managers a place to 
systematically explain their ratings. Officials from OGAC and the World 
Bank with whom we met said that the Global Fund's more consistent 
documentation of the basis of its decisions has made the decisions 
easier to understand. 

Grant Files Demonstrate Improved Documentation Supporting Funding 
Decisions: 

Our review of random samples of disbursement and phase 2 grant files 
indicated that most files systematically explain a number of key 
factors used to support disbursement and grant renewal 
decisions.[Footnote 23] In our 2005 report, we observed that the Global 
Fund's grant files provided little explanation of disbursement 
decisions, including decisions to disburse funds to recipients who 
reported not meeting their targets. In addition, our 2005 report noted 
that, according to Global Fund officials, many grant renewal decisions 
were not supported by the information needed to assess whether funding 
decisions were consistently based on grant performance. 

In our current review, we found that Global Fund grant files 
consistently contained explanations of ratings of grant performance 
that were important to funding decisions, even when key stakeholders' 
ratings and recommendations did not concur. Based on our samples, 100 
percent[Footnote 24] of both disbursement and phase 2 files contained 
narratives explaining the manager's rating of the grant's performance. 
Most grant files also contained explanations for lack of concurrence in 
ratings or recommendations by the various officials charged with 
assessing grant performance.[Footnote 25] For example: 

* In all 8 cases in which fund portfolio managers' phase 2 grant 
ratings differed from those of the evaluation staff, the scorecards in 
the grant files contained an explanation for the lack of 
concurrence.[Footnote 26] 

* In all 5 cases in which fund portfolio managers' phase 2 grant 
renewal recommendations differed from those of the LFAs', the 
scorecards in the grant files contained an explanation for the lack of 
concurrence. 

* In cases in which fund portfolio managers' assessments of grant 
performance led them to disagree with the disbursement amount 
recommended by the LFA or the amount requested by the grant recipient, 
31 of 32 of those grant files included a narrative explaining the 
discrepancy.[Footnote 27] 

According to Global Fund officials, such explanations provide valuable 
information that helps decision-makers better understand and consider 
grant performance. 

The Global Fund files that we reviewed also consistently explained 
contextual information and other issues that may affect the grant 
recipient's ability to meet agreed-upon targets. We found that an 
estimated 96 percent of disbursement files in which portfolio managers 
had specified contextual issues that negatively affected grant 
performance included narratives explaining each issue. According to 
Global Fund officials, such information is crucial to grant 
disbursement and renewal decisions, especially if recipients have not 
met many of the targets set at the grant's initiation. In addition, in 
reviewing 43 disbursement files for grants whose recipients had not yet 
met remedial requirements imposed by the Global Fund as conditions for 
grant renewal, we found that 42 (98 percent) contained an explanation 
of recipients' progress toward meeting the requirements. 

Global Fund Informally Gathers Missing Data on Grant Recipients' 
Performance: 

Although recipients' formal documentation of grant performance remains 
incomplete, Global Fund officials informally gather the missing 
information that they consider necessary for making and documenting the 
basis for funding decisions. In June 2005, we reported that recipient 
progress reports varied in quality and that the limited monitoring and 
evaluation capabilities of many recipients raised questions about the 
accuracy of their reporting.[Footnote 28] Our current analysis found 
that an estimated 39 percent of phase 2 grant files contained evidence, 
identified by fund portfolio managers, of weaknesses in the reliability 
of the grant recipient's data. In contrast to the consistent 
documentation we found on forms completed by Global Fund staff, many 
periodic performance reports completed by grant recipients lacked 
explanations either for not meeting or for exceeding the grant's 
targets. In those cases, according to LFAs, fund portfolio managers, 
and other Global Fund officials, fund portfolio managers relied on 
regular phone and e-mail contact with grant recipients or other 
stakeholders to obtain the missing information needed for performance- 
based funding decisions. Global Fund officials said that information 
crucial to funding decisions is documented on the disbursement decision-
making form or phase 2 grant scorecard, even if it was not recorded by 
grant recipients or LFAs in their formally required reports. 

Global Fund portfolio managers said that recipients' explanations for 
not meeting targets may influence the portfolio manager's 
recommendation to withhold funds or, alternately, to continue to fund 
the grant despite performance problems. According to Global Fund 
officials and public health experts, improving grant recipients' 
monitoring and evaluation capacity, as well as their ability to report 
accurately and completely, will require long-term investment on the 
part of the Global Fund and its partners. 

Global Fund Did Not Implement Earlier Risk Model but Is Developing 
Comprehensive Risk Framework That Includes Early Alert and Response 
System: 

The Global Fund did not implement the risk assessment model that it was 
developing at the time of our 2005 report, because it determined that 
the model did not accurately identify grant risk. The organization 
relies on elements of its structures and processes, including its 
initial technical review, disbursement decision-making form, periodic 
grant ratings, CCM oversight, information from technical partners, and 
LFA oversight, to identify potential risks. Recognizing the need to 
establish a more comprehensive approach to risk management, the Global 
Fund has begun developing a risk assessment framework for the 
organization that includes an early warning and response system to 
address poorly performing grants. 

Global Fund Did Not Implement the Grant Risk Assessment Model Described 
in the 2005 GAO Report: 

The Global Fund did not implement the risk-assessment framework to 
identify poorly performing grants that it was developing at the time of 
our 2005 report.[Footnote 29] We reported that the organization had 
devised a risk assessment model and an early warning system to identify 
poorly performing grants and more systematically alert portfolio 
managers when they needed to intervene.[Footnote 30] According to the 
Global Fund, because it disburses grants in countries with varying 
levels of economic development and health systems capacity, the risk 
model was to incorporate quantitative data, such as grant size and 
performance as well as country development and corruption data. Using 
these quantitative indicators, the model would generate reports that 
indicated potential problems, and portfolio managers would evaluate the 
reports in light of contextual information. According to an official 
who participated in developing the framework, it was not implemented 
because it relied too heavily on quantitative indicators and did not 
adequately account for contextual factors, leading to risk ratings that 
were too inaccurate to be useful. For example, according to Global Fund 
officials, in a test of the model, a particular grant was rated as low 
risk based on the host country's development and corruption indicators. 
However, the grant ultimately failed and was not renewed at the phase 2 
grant renewal review. 

Global Fund Applies Elements of Risk Management but Lack of Risk 
Assessment Model Limits its Ability to Respond to Poorly Performing 
Grants: 

Although the Global Fund's grant oversight incorporates several 
elements of risk management, the absence of a risk assessment model 
limits its ability to respond methodically to poorly performing grants 
and use available resources to increase oversight as needed. According 
to Global Fund officials, the organization currently relies on existing 
oversight mechanisms such as its initial technical review of grant 
proposals, standardized decision forms, periodic grant ratings, CCM 
oversight, technical partners' assistance, and LFAs' reviews to 
identify and assess potential mismanagement, irregularities, or other 
risks to successful grant implementation. 

* Technical review. The technical review panel raises important 
technical issues that grantees must address when presenting their 
proposals to the panel. Proposals with a very high technical risk 
profile generally are not recommended for funding. 

* Disbursement decision-making form. Grant risk is mitigated by the 
fund portfolio manager's use of the standard disbursement decision- 
making form, which includes financial and program data from the 
recipient that has been verified by the LFA. 

* Rating grant progress for each disbursement request. Since 2006, 
according to Global Fund officials, every progress and disbursement 
request, after the first disbursement, has been graded on a scale of A, 
B1, B2, or C. This information is posted on the Global Fund Website's 
financial data base and included in grant performance reports that are 
updated on the Global Fund website at each disbursement. This rating 
system is a key tool for identifying grants at risk and for sharing 
information with technical partners. 

* Country coordinating mechanism (CCM). A key responsibility of the CCM 
is to continue to monitor grant progress during implementation and 
identify problems that may affect progress. In many countries, Global 
Fund technical partners such as UNAIDS, WHO, and USAID are members of 
CCMs. 

* Partner assistance. Global Fund officials rely on technical partners 
with staff based in recipient countries to provide contextual 
information on grant performance, identify risks, and help respond to 
problems that affect grant implementation. 

* LFA reviews. Global Fund officials emphasized that LFAs identify 
potential grant risks in their periodic verification of grant progress 
and during the cumulative review and performance assessment for the 
phase 2 renewal process. 

The absence of a model to assess grant risk has limited the Global 
Fund's ability to methodically identify poorly performing grants and 
use available resources to increase oversight as needed. According to a 
senior manager from an LFA with one of the largest grant portfolios, 
because the Global Fund has not assessed grants as high, medium, or low 
risk, LFA oversight has not differed substantially by grant risk level 
and LFA oversight resources have not been used to optimal effect. For 
example, although some grants may require more oversight because of 
potential misuse of grant money or limited recipient capacity, LFA task 
orders and fees are generally no different for potentially problematic 
grants than for grants with few expected problems. Similarly, the 
frequency of LFA visits to project sites for monitoring and data 
verification has not been based on a systematic estimate of risk. 

Global Fund Is Developing a Comprehensive Framework for Risk Management 
and Has Established First Components: 

Global Fund officials informed us in April 2007 that they are 
developing a top-level framework for risk management that will cover 
all aspects of the organization's strategic direction, including 
addressing resources and skills at the secretariat level, developing a 
model for systematically assessing grant risk, and fully implementing 
an early alert and response system. Global Fund officials have 
acknowledged the need for a quantitative model for ranking grants by 
level of risk, supplemented by additional qualitative factors that may 
change a grant's rating or ranking, to identify and mitigate grant risk 
in a timely manner. The Global Fund recently organized a risk seminar 
for directors and senior managers and engaged an international firm to 
help them achieve consensus on a shared approach to comprehensive risk 
management. We reviewed a draft outline of the guiding principles for 
developing a risk management framework that the Global Fund developed 
in February 2007. As of April 2007, the Global Fund is in varying 
stages of progress in developing and implementing detailed risk 
strategies. 

According to Global Fund officials, the secretariat has put in place 
the first components of its early alert and response system intended to 
identify as early as possible grants that are performing poorly and 
facing implementation difficulties. These first components include 
posting the grant disbursement and renewal ratings on the Global Fund 
Website and efforts to engage more technical assistance from partners 
for poorly performing grants. Global Fund officials recognize that for 
the system to work effectively principal recipients, CCMs, 
stakeholders, and partners must share responsibility for tracking the 
progress of grant implementation and take appropriate action when 
progress is impeded. Global Fund officials stated that the early alert 
and response system will eventually include documenting and 
disseminating best practices, formalizing the system within the 
secretariat and among country-level stakeholders and partners, and 
increasing the engagement of partners in grant oversight. 

Global Fund Has Limited Ability to Manage and Oversee Local Fund 
Agents' Performance: 

The Global Fund lacks the information it needs to manage and oversee 
the LFAs because of a lack of systematic assessments of LFAs' 
performance. Good practice suggests that organizations monitor their 
contractors' performance during the course of interaction and 
periodically evaluate performance based on clear expectations. 
Assessment results should include consistent patterns of rewards, 
penalties, or both. (See app. II for sources of these principles.) 
Global Fund portfolio managers set expectations for LFA performance 
informally and individually, frequently leading to inconsistent 
expectations and resulting in challenges for both the LFAs and their 
managers. Moreover, the Global Fund does not require formal assessments 
or reports of LFA performance; instead, LFAs are assessed informally 
and irregularly, and assessment results are not systematically 
documented. As a result, the Global Fund has limited records of, and 
data on, LFA performance. Although the Global Fund made a previous 
attempt to assess LFAs more systematically, this effort was 
unsuccessful. According to secretariat staff, key partners, and outside 
experts, LFAs' performance and capacity vary. 

Global Fund Has Not Standardized Its Expectations for Local Fund Agent 
Performance: 

Rather than establish standardized performance expectations for all 
LFAs, the Global Fund portfolio managers establish expectations 
informally for the quality of each LFA's performance. The Global Fund's 
contracts with LFAs, as well as the guidelines that it provides, 
outline the tasks that all LFAs must complete, such as considering a 
principal recipient's programmatic and financial implementation 
progress in relation to its plans. The contracts also contain general 
statements about LFA performance; for example, a sample LFA contract 
specifies that all tasks should be carried out to the satisfaction of 
the Global Fund.[Footnote 31] However, Global Fund policy states--and 
secretariat staff and 11 of the 12 LFA country teams that participated 
in our structured interview confirmed--that the fund portfolio manager 
is primarily responsible for defining satisfactory performance for his 
or her designated LFAs. As of March 2007, the Global Fund had not 
provided fund portfolio managers any specific training or written 
guidance defining acceptable or good LFA performance, including the 
quality of their reporting.[Footnote 32] 

The lack of standardized performance expectations results in challenges 
both for the LFAs and for Global Fund management. 

* LFA challenges. Because fund portfolio managers set expectations 
informally and individually, LFA country teams frequently encounter 
different expectations from successive portfolio managers. For example, 
among the LFA country teams who participated in our structured 
interviews, 6 of 10 teams who had interacted with more than one fund 
portfolio manager said that the managers' criteria for a high-quality 
report had varied. According to the respondents, variations in fund 
portfolio managers' expectations often involved differences in the 
scope of work that they expected LFAs to complete. For instance, 
members of one country team said that their previous fund portfolio 
manager had wanted the team to focus primarily on financial data in its 
reports, while the current manager wanted a focus on programmatic 
issues. In another country, one fund portfolio manager wanted the team 
to conduct on-site verification of grant subrecipients, while a 
subsequent manager did not consider site visits a priority. In the 
remaining four cases, country teams did not report substantial 
variation between different fund portfolio managers. In one of these 
cases, the team said that a previous manager established expectations 
that subsequent managers used in turn, therefore providing continuity. 

* Management challenges. The lack of standardized LFA performance 
expectations also presents challenges among those responsible for 
managing the LFAs. According to the manager of one LFA central team 
with a large grant portfolio, variations in Global Fund expectations 
made it difficult to establish best practices for its LFA country 
teams. Likewise, several Global Fund officials noted that secretariat 
staff have conflicting ideas about LFA performance criteria. In one 
instance, according to Global Fund officials, a group of fund portfolio 
managers were unable to agree on what constituted a high-quality 
report. Fund portfolio managers and other key officials observed that 
more standardization of expectations would be beneficial, although some 
noted that this standardization should be balanced to allow them to 
maintain flexibility to account for country context. 

Global Fund Does Not Assess LFAs Systematically and Lacks Formal 
Records of LFA Performance: 

The Global Fund does not require formal, regular assessments of LFA 
performance. As a result, it lacks LFA performance records and cannot 
systematically track performance. 

LFA Performance Assessment and Reporting Are Informal and Irregular: 

Although Global Fund officials regularly review the reports they 
receive from the LFAs and provide informal feedback to country teams, 
they assess LFA performance informally and at irregular 
intervals.[Footnote 33] All fund portfolio managers that we 
interviewed, as well as 11 of the 12 LFA country teams that 
participated in our structured interviews, said that fund portfolio 
managers interact informally and frequently with country team members, 
often orally or by e-mail. In addition, all but one country team said 
that fund portfolio managers provide informal feedback on their 
performance. For example, members of one team noted that they received 
feedback from their fund portfolio manager for each report and 
requested more information as necessary. In another case, the manager 
provided feedback to the LFA central team, which passed the feedback to 
the country team. A majority of the country teams reported receiving 
feedback from their fund portfolio manager when he or she traveled to 
the recipient country, at least once a year. Fund portfolio managers 
told us that if they continually encounter problems with a country 
team, they inform the Global Fund's LFA manager, who discusses the 
issue with the central team; if this does not resolve the problem, the 
contract may be terminated. A key Global Fund official stated that two 
to three LFA country team subcontracts are terminated each year based 
on information from fund portfolio managers on their poor performance. 

Although LFA central teams provide some performance feedback to their 
country teams, the scope and frequency of that feedback varies 
depending on the LFA's structure. Ten of the LFA country teams that 
participated in our structured interviews told us that LFA central 
teams provide informal feedback about their performance. The central 
team at two of the six LFA organizations reviews all products before 
they reach the secretariat. At two other LFA organizations, reports are 
reviewed only if it is deemed necessary, and in those cases, regional 
coordinators or mentors may review the reports.[Footnote 34] At the 
remaining two LFA organizations, the distinctions between the country 
and central teams are less clear, because the reports are at least 
partially written by central team members. 

Lack of Assessment Records Limits Available Information on LFA 
Performance: 

The lack of formal assessments limits the Global Fund's access to the 
information needed to manage LFAs' performance. The fund portfolio 
managers we interviewed said that their frequent interaction with 
country teams generally allows them to know which teams are performing 
well and which teams need improvement. However, Global Fund officials 
with LFA management responsibility stated that formalizing the process 
would allow the agency to establish LFA performance records and 
identify situations in which more oversight of LFAs by the Global Fund 
may be required. A working group of Global Fund experts echoed these 
concerns, reporting that despite extensive debate about the LFA model, 
the Global Fund had conducted little systematic assessment of the 
performance of individual LFA country teams.[Footnote 35] 

Global Fund Previously Attempted to Implement Systematic LFA 
Assessments: 

A prior attempt to introduce a tool to make LFA assessments more 
systematic was not successful, because use of the tool was not 
mandatory and fund portfolio managers did not see it as a priority. 
According to the Global Fund, the LFA manager conducted a pilot of an 
evaluation checklist as a tool for fund portfolio managers to 
systematically assess LFA performance. Secretariat staff stated that, 
because Global Fund management did not require fund portfolio managers 
to complete the checklist, very few portfolio managers used it. As of 
early 2007, the LFA manager was developing a revised tool to routinely 
collect staff input on LFAs. However, it is too early to determine 
whether this tool, when finalized and made available to staff, will 
capture the information needed to assess LFA performance. According to 
the LFA manager, integrating this tool into existing tasks and making 
it an explicit component of fund portfolio managers' job descriptions 
would increase its use. 

LFA Performance and Capacity Reportedly Vary: 

Although Global Fund officials cited instances in which LFA country 
teams performed adequately, secretariat staff, key partners, and 
outside experts expressed concerns about some LFAs' capacity to oversee 
grant recipients' programmatic and procurement activities. To 
illustrate adequate LFA capacity and performance, secretariat staff 
identified cases where LFA country teams have quickly identified 
problems with grants. For example, the majority of fund portfolio 
managers we interviewed noted that most LFA country teams performed 
financial oversight competently.[Footnote 36] Similarly, a procurement 
officer described a country team that focused on supply management 
issues throughout the life of the grant and proved instrumental in 
resolving a large corruption problem. One fund portfolio manager 
described a country team that had enough knowledge of monitoring, 
evaluation, and procurement to understand an LFA subcontractor's 
initial assessment of recipient capacity and, therefore, could use this 
information in subsequent reporting about grantee progress. 

Conversely, secretariat staff also cited multiple instances in which 
LFAs demonstrated lack of capacity that affected the conduct of their 
oversight duties. In a recent Global Fund survey, secretariat employees 
who identified themselves as having sufficient exposure to LFAs to form 
an opinion reported mixed experiences regarding LFAs' technical program 
and monitoring expertise.[Footnote 37] About half of the respondents 
disagreed with the statement that LFAs with whom they had worked 
provided "adequate" expertise on health and program issues. The 
remainder was about equally divided between those who agreed that 
health and program expertise was adequate and those who neither agreed 
nor disagreed. Global Fund employees' assessments of the adequacy of 
LFAs' expertise for monitoring and evaluation were similarly mixed. The 
survey also provided evidence that the service quality varies greatly 
among countries: about three-quarters of the staff agreed with the 
statement that "within LFA firms there are substantial differences in 
service quality across countries." 

In addition, Global Fund partners and outside experts have raised 
concerns about LFAs' oversight capacity. UNAIDS officials said that 
they have serious doubts about the capacity of LFAs to monitor program 
progress, specifically noting that LFAs have little understanding of 
how to weigh and balance various performance targets that are not of 
equal importance.[Footnote 38] For example, according to these 
officials, an LFA that lacks strong technical program capacity might 
not recognize that a recipient exceeding a simple performance target, 
such as training staff, may be trying to compensate for poor 
performance in more difficult target areas, such as administering drugs 
to treat AIDS, TB, or malaria. Several other sources--a report 
commissioned by the Global Fund, our 2005 report, and several reports 
by an acknowledged expert on the Global Fund--also note problems with 
LFA capacity. (See app. II for a list of sources.) 

Conclusions: 

Since our report in June 2005, the Global Fund has taken steps to 
improve operations at its secretariat in Geneva while it continues to 
confront complex issues facing grant implementation at the country 
level. The Global Fund will continue to face important challenges, 
including evaluating the effectiveness of its investment of the 
billions of dollars it receives annually from the United States and 
other donors and the impact of its programs over time. The Global Fund 
has improved the transparency of its periodic disbursement and grant 
renewal decisions by providing better documentation in its grant files. 
Delays in developing a systematic approach to assessing grant risk have 
left the Global Fund vulnerable to some of the risks associated with 
implementing grants in developing countries. However, the Global Fund 
board recognizes the importance of developing a more comprehensive 
approach to risk management, and the secretariat has recently drafted 
principles to guide its development of a risk framework for the 
organization. In addition, the Global Fund's lack of a formal process 
for setting expectations and assessing and analyzing LFA performance 
constrains its ability to determine the quality of the LFAs' services, 
track LFA performance over time, and address ongoing capacity issues. 
The lack of a formal assessment process also limits the information 
available to the Global Fund during its upcoming global retender of LFA 
contracts. 

Recommendations for Executive Action: 

To enhance Global Fund operations, we recommend that the Secretaries of 
State and HHS work with the Global Fund's Board Chair and Executive 
Director to take the following two actions: 

* establish standardized expectations for LFA performance, and: 

* require systematic assessments of LFA performance and the collection 
and analysis of LFA performance data to improve the management and 
oversight of LFAs. 

Agency Comments: 

Written comments on a draft of this report from the Departments of 
State and Health and Human Services and the U.S. Agency for 
International Development are represented in the unified response 
received from the Office of the U.S. Global AIDS Coordinator. The 
Global Fund also provided written comments on the draft. Both entities 
agreed with the report's findings, conclusions, and recommendations. 
The Office of the U.S. Global AIDS Coordinator stated that the report 
accurately reflected areas in which the Global Fund has made progress 
as well as areas in which more work remains to be done. The Office's 
response noted that the United States will urge the Board to adopt 
concrete recommendations from several studies to improve the 
accountability and transparency of Global Fund activities and will work 
with the Global Fund to improve its oversight and risk assessment 
mechanisms. The Global Fund stated that the report reinforced the 
importance of measures it has begun taking to better measure local fund 
agent performance. Regarding risk assessment, the Global Fund 
emphasized the role of its country-based and global partners in helping 
to track grant implementation and provide technical support as needed. 
(See apps. III and IV for their comments.) 

We are sending copies of this report to interested congressional 
committees and will make copies available to others on request. In 
addition, this report is available on GAO's Web site at 
http://www.gao.gov. 

If you or your staff have any questions, please contact me at (202) 512-
3149 or gootnickd@gao.gov. Contact points for Offices of Congressional 
Relations and Public Affairs may be found on the last page of this 
report. Key contributors to this report are listed in appendix V. 

Signed by: 

David M. Gootnick: 
Director, International Affairs and Trade: 

[End of section] 

Appendix I: Objectives, Scope, and Methodology: 

To assess the Global Fund's efforts to improve documentation of 
performance-based-funding decisions, we analyzed the forms used to 
collect data on grant performance and discussed with Global Fund 
officials how the forms have changed since GAO's 2005 report. We met 
with officials from all of the entities that have current contracts to 
serve as local fund agents and with officials from the Office of the 
Global AIDS Coordinator, UNAIDS, and the World Bank---the Global Fund's 
key technical partners--to discuss how documentation of the Global 
Fund's decisions has changed and whether it has improved. 

To review information in the grant files used to support performance- 
based funding decisions, we analyzed two separate simple random 
probability samples of grant funding decisions using a separate data 
collection instrument for each sample. The first sample consisted of 80 
of the 348 grants that the Global Fund assessed for performance-based 
funding disbursements between January 1 and October 1, 2006. The second 
sample consisted of 45 of the 65 grants that the Global Fund assessed 
for phase 2 grant renewal during the same time period.[Footnote 39] We 
chose January 2006 as the starting point for our sample because Global 
Fund officials told us that their new disbursement decision worksheet-
-created to address GAO's recommendation that they better document 
their decisions--was fully implemented by the end of 2005. With our two 
probability samples, each member of the study population had a nonzero 
probability of being included, and that probability could be computed 
for any member. Each sample case file was subsequently weighted in the 
analysis to account statistically for all the case files in the 
population, including the files that were not selected. 

Because we followed a probability procedure based on random selections, 
our samples are only one of a large number of samples that we might 
have drawn (for both the grant disbursement and phase 2 file reviews). 
Since each sample could have provided different estimates, we express 
our confidence in the precision of our particular sample's results as 
95 percent confidence intervals. These are intervals that would contain 
the actual population values for 95 percent of the samples we could 
have drawn. All percentage estimates provided in this report based on 
our samples have 95 percent confidence intervals of within plus or 
minus 13 percentage points. 

For each grant in our disbursement sample, we requested the grant 
recipient's Progress Update and Disbursement Request report, the Local 
Fund Agent Recommendation report, and the Global Fund's Disbursement 
Decision-Making Worksheet. For the phase 2 decision sample, we 
requested the following documents for each grant: 

* Phase 2 Grant Scorecard (the in-house version that goes to the 
panel): 

* Phase 2 Grant Scorecard (the panel's version that goes to the board): 

* Documentation of the board's decision with any explanation or 
justification of the decision (whether this is in the form of a 
scorecard or some other format): 

* Phase 2 Panel Minutes: 

* Board Notes: 

* Grant Performance Report: 

* Annex A Attachments 2 and 3: 

* Local fund agent Phase 2 Assessment Report: 

We gathered the information from the documents for our data collection 
instruments and verified the data that we used to support our findings. 

Our file review consisted of a number of checks on the presence or 
absence of an array of qualitative and contextual information that the 
Global Fund forms specify as important for grant decision-making and 
that therefore should be provided by those responsible for filling them 
out. We did not evaluate the appropriateness or accuracy of the 
judgments made on the basis of the narrative or contextual information 
provided in the documents; we focused on the issue of whether the 
contextual or narrative information provided was relevant to particular 
judgments or decisions.[Footnote 40] 

In our analysis of the disbursement files, while we examined 
information contained in other documents, we focused mostly on the 
Disbursement Decision-Making Form, due to the fact that this was the 
key form that the Global Fund instituted for disbursement-related 
decision-making since our last report. In this form, we checked for the 
presence or absence of the following pieces of information: 

* Fund portfolio manager/cluster explanation for differences in fund 
portfolio manager/cluster and LFA ratings: 

* Fund portfolio manager's explanation for performance rating: 

* Fund portfolio manager's explanation for differences in funding 
decision with the principal recipient request and LFA recommendation: 

* Fund portfolio manager's check-offs on an array of grant decision- 
making issues such as performance evaluation, financial considerations, 
future and outstanding requirements, etc. 

* Fund portfolio manager's explanation for array of contextual issues 
(e.g., governance, general management, and external factors): 

* Fund portfolio manager's explanation for required documents and 
conditions precedent items: 

In the phase 2 files we focused on the Grant Scorecard, as this is the 
key Global Fund decision-making document for this phase, although we 
performed checks on several other documents as well. We checked for the 
presence or absence of the following pieces of information in the 
following phase 2-related documents; all items are for the Grant 
Scorecard unless otherwise noted: 

* Evaluation unit's explanation for nonconcurrence with fund portfolio 
manager/cluster rating: 

* General explanation for difference between fund portfolio manager/ 
cluster recommendation and the LFA's recommendation: 

* Evaluation unit's explanation for difference between fund portfolio 
manager/cluster recommendation and the LFA's recommendation: 

* General explanation for difference in the recommended amounts between 
Global Fund financial review and cluster leader phase 2: 

* General explanation for difference in the recommended amounts between 
LFA and fund portfolio manager/cluster leader (i.e. the Global Fund) 
phase 2: 

* Fund portfolio manager/cluster identification of material issues with 
reliability of principal recipient's data: 

* Fund portfolio manager/cluster explanation for phase 2 rating: 

* Fund portfolio manager/cluster explanation for phase 2 
recommendation: 

* (LFA phase 2 assessment) report-specific conditions identified by LFA 
for 'Conditional Go' recommendations: 

* Time-bound actions identified by portfolio manager/cluster for 
'Conditional Go' recommendations: 

To assess the Global Fund's progress in implementing a risk assessment 
model and early warning systems for its grants, we followed up on the 
risk assessment model and early warning system described in our 2005 
report with Global Fund officials. In addition, we reviewed 
international standards for risk that establish the criteria for 
assessing risk developed by the Committee on Sponsoring Organizations 
of the Treadway Commission. We also discussed the need for a risk 
assessment model and early warning system with key Global Fund staff, 
key Global Fund partners, UNAIDS, World Bank, and OGAC, and with the 
Global Fund Inspector General and LFA officials. In addition, we 
reviewed Global Fund board notes and the Global Fund's draft outline of 
Guiding Principles for a Risk Management Framework. In their technical 
review of our draft, Global Fund officials clarified the distinction 
between the risk assessment model that was not implemented and the 
current early alert and response system, and they provided additional 
information on the current status of the early alert and response 
system. We modified the risk assessment section of the draft based on 
our analysis of this information. 

To assess how the Global Fund oversees and measures the capacity and 
performance of local fund agents, we established criteria for good 
practices in performance assessment, consulted key reports and 
documents, met with relevant personnel, conducted structured interviews 
with LFA country teams, and analyzed the structured interview data 
using a content analysis framework. We consulted GAO experts in 
performance assessment and contracting, good practice documents from 
the Government Performance and Results Act,[Footnote 41] performance- 
based contracting literature, internal control literature, and training 
development literature. (See app. II) To understand Global Fund 
policies and requirements regarding LFA performance, we reviewed Global 
Fund documentation, including guidelines for LFA work, the Global 
Fund's operational policy manual, LFA manager terms of work, and LFA 
framework contract forms, as well as relevant evaluative reports 
published by the Global Fund and development experts. We meet with key 
Global Fund officials in Geneva, Switzerland, including the fund 
portfolio managers and members of the Portfolio Services and Projects 
Team, representatives from all LFA central teams, selected LFA 
subcontractors, and recognized experts on the Global Fund to discuss 
the current practices and potential difficulties of the LFA system. We 
also reviewed the methodology and results of a survey of Geneva-based 
Global Fund secretariat staff who are users of LFAs conducted by a 
Global Fund contractor in November of 2006. 

Additionally, to support our review of issues related to LFA capacity 
and performance, we conducted structured telephone interviews with a 
nonprobability sample of 12 LFA country teams out of a total of 102 LFA 
country teams worldwide.[Footnote 42] We selected country teams for 
this sample based on criteria such as the size and amount of the grants 
that the LFA oversaw, whether the LFA was located within the country, 
and whether the LFA acted as a mentor to other LFA country teams. The 
purpose of these 12 interviews was to obtain information on the views 
of these important participants in the Global Fund process; we did not 
obtain a representative perspective of the views of all 102 country 
teams. We pre-tested our questions with two of our initial respondents 
and refined our questions based on their input. We followed up via e- 
mail with our respondents to obtain supplementary information. To 
summarize the open-ended responses and developed categories for the 
analysis, we first grouped interview responses by general categories, 
based on our objectives, criteria, and inductive observation. Within 
each of these general categories, we then further grouped the data into 
subcategories based on the emerging themes. To ensure the validity and 
reliability of our analysis, these subcategories were reviewed by a 
methodologist, who proposed modifications. After discussion of these 
suggestions, we determined a final set of subcategories. An analyst and 
a methodologist independently tallied the number of respondents 
providing information in each subcategory, compared their tallies, and 
reconciled any variation. 

[End of section] 

Appendix II: Other Sources Cited: 

Principles for Contractor Management: 

* GAO, Strategic Issues Web pages on the Government Performance and 
Results Act (GPRA): 

* GAO, Internal Control Management and Evaluation Tool. GAO-01-1008G. 
Washington D.C.: Aug. 2001. 

* Office of Federal Procurement Policy, Seven Steps to Performance- 
Based Services Acquisition, see: www.acqnet.gov/Library/OFPP/ 
BestPractices/pbsc: 

* GAO, Contract Management: Guidance Needed for Using Performance-based 
Service Contracting. GAO-02-1049. Washington, D.C.: Sept. 23, 2002. 

Analyses of LFA Capacity and Performance: 

* GAO, Contract Management: Guidance Needed for Using Performance-Based 
Service Contracting. GAO-02-1049. Washington, D.C.: 2002. 

* GAO, Internal Control Management and Evaluation Tool. GAO-01-1008G. 
Washington, D.C.: 2001. 

* Kruse, Stein-Erik, and Jens Claussen. Review of the Roles, Functions 
and Performance of Local Fund Agents. Centre for Health and Social 
Development and Nordic Consulting Group; 2004. 

* Office of Federal Procurement Policy, Seven Steps to Performance- 
Based Services Acquisition. See: www.acqnet.gov/Library/OFPP/ 
BestPractices/pbsc: 

* Radelet, Steven et al. Challenges and Opportunities for the New 
Executive Director of the Global Fund: Seven Essential Tasks. Global 
Fund Working Group, Center for Global Development, Washington D.C.: 
October 2006. 

* Radelet, Steven. The Global Fund to Fight AIDS, TB, and Malaria: 
Progress, Potential, and Challenges for the Future. Center for Global 
Development, Washington D.C.: 2004. 

[End of section] 

Appendix III: Comments from the Global Fund: 

Investing in our future: 

The Global Fund To Fight AIDS, Tuberculosis and Malaria: 

22 April 2007: 

Mr David Gootnick: 
Director, International Affairs and Trade Issues: 
United States Government Accounting Office: 
Washington DC 20548: 
United States of America: 

Dear Mr Gootnick: 

Thank you for sharing your draft report on the Global Fund: "Global 
Health: Global Fund to Fight AIDS, Tuberculosis and Malaria Improved 
Documentation of Funding Decisions but Needs to Standardize Oversight 
Expectations and Assessments." External analyses such as this report 
are extremely useful. We welcome its findings as they provide feedback 
and recommendations that will help the Global Fund to remain adaptive, 
responsive and ultimately more successful in its fight against HIV/ 
AIDS, tuberculosis and malaria. 

Documentation and Funding Decisions: 

We acknowledge your recognition of the significant improvements made by 
the Global Fund in the documentation of decisions to disburse funds and 
renew grants since your 2005 report entitled "Global Health: The Global 
Fund to Fight AIDS, Tuberculosis and Malaria is Responding. to 
Challenges but Needs Better Information and Documentation for 
Performance-based Funding." 

As noted in your report, the Global Fund has significantly strengthened 
its systematic documentation of funding decisions throughout a grant's 
life-cycle. We are committed to continuously monitor and improve the 
system as appropriate. 

Risk Management Framework and Early Alert System: 

The report reflects the progress made to date by the Global Fund to 
improve grant oversight and grant-associated risk management. We have 
recognized the need to develop a comprehensive risk management 
framework for the Global Fund and work has commenced on this. As part 
of this framework the Global Fund has already implemented the first 
phase of an early alert and response system to address poorly 
performing grants. We will work to improve the systems and tools for 
use by the Secretariat and our in-country partners, as well as by our 
global partners, to better respond to grants at risk. 

We wish to emphasize the different yet critical roles and 
responsibilities that country-based and global partners play in 
tracking progress in Global Fund grant implementation and providing 
technical support as needed. This dependence on in-country partners 
arises from the founding principles that underpin the business model of 
the Global Fund. The Global Fund was established as a financing not an 
implementing entity with no country-based staff. The support of 
partners is therefore essential for an effective response to address 
grants at risk. 

The Secretariat will continue to make all possible efforts to improve 
its communication and information sharing, to ensure that the risk 
information is more readily accessible and available to our partners at 
the country level. We will also work with them to strengthen the 
reciprocal, timely and effective flow of information from our partners 
in the field. 

Local Fund Agent's Management and Oversight: 

The Secretariat agrees with the report's findings and recommendations 
on the need to establish standardized expectations for Local Fund 
Agent's (LFA) performance and to require the systematic assessment of 
LFA performance. The quality of LFAs' work-products and performance is 
periodically reviewed by individual Fund Portfolio Managers, and the 
Secretariat provides feedback to LFAs. This assessment now needs to be 
more transparent and systematic. We had already commenced work on 
developing performance standards and measuring tools and thus report 
reinforces the importance of that initiative. These standards will form 
part of any new contractual agreement following the retendering of LFA 
services due to commence in mid 2007. 

The report also raises concerns about the ability of some current LFAs 
to monitor procurement and program implementation. This is an area of 
ongoing discussion with LFAs. The Secretariat is committed to ensure 
that all future LFAs have access to high-quality procurement and 
programmatic skills, to enable them to better deliver on the oversight 
of grants performance. 

Conclusion: 

In conclusion, the Global Fund Secretariat thanks GAO for this report. 
We appreciate the constructive and forward looking recommendations and 
commit to their implementation. 

We welcome the United States Congress's continued interest in, and 
support for, the Global Fund. We value the significant contribution 
that representatives of the United States make on the Global Fund Board 
and the close collaboration we have at country level with the PEPFAR 
program. We are also deeply grateful to the United States for its 
significant financial contribution to the global fight against the 
three pandemics. 

Yours sincerely: 

Signed by: 

Helen Evans: 
Executive Director Ad Interim: 

[End of section] 

Appendix IV: Comments from Departments of State and Health and Human 
Services and U.S. Agency for International Development: 

United States Department of State: 
Assistant Secretary for Resource and Chief Financial Officer: 
Washington, D.C. 20520: 

Ms. Jacquelyn Williams-Bridgers:
Managing Director: 
International Affairs and Trade: 
Government Accountability Office: 
441 G Street, N. W. 
Washington, D.C. 20548-0001: 

Apr 26 2007: 

Dear: Ms. Williams-Bridgers: 

We appreciate the opportunity to review your draft report, "Global 
Health: Global Fund to Fight AIDS, T13 and Malaria Improved 
Documentation for Its Funding Decisions but Needs Standardized 
Expectations and Assessments," GAO Job Code 320416. 

The enclosed Department of State comments are provided for 
incorporation with this letter as an appendix to the final report. 

If you have any questions concerning this response, please contact Mary 
Jeffers, Point for Global Fund Issues, Office of the U.S. Global AIDS 
Coordinator, at (202) 663-2586. 

Sincerely, 

Signed by: 

Sid Kaplan (Acting): 

cc: GAO--Audrey Solis: 
S/GAC - Amb. Mark Dybul: 
State/OIG - Mark Duda: 

Department of State, Health and Human Services, and USAID Comments GAO- 
07-627; Code 320416: 

On behalf of the U.S. Departments of State (DOS) and Health and Human 
Services (HHS), and the U.S. Agency for International Development 
(USAID), the Office of the U.S. Global AIDS Coordinator (OGAC) 
appreciates the opportunity to comment on the draft report from the 
Government Accountability Office (GAO) entitled, "Global Fund to Fight 
AIDS, TB and Malaria Has Improved Its Documentation of Funding 
Decisions but Needs Standardized Oversight Expectations and 
Assessments" (GAO-07-627). 

OGAC concurs with the report's conclusions. We believe the report 
accurately identifies areas in which the Global Fund Secretariat has 
made great improvement, as well as areas in which there is still work 
to be done. One of President George W. Bush's primary mandates for the 
Global Fund at. its inception was that it award grants on the technical 
merit of proposals and make disbursements based on subsequent grant 
performance. As the Global Fund enters its sixth year of operations, it 
is clear there is still significant variation in how well recipients 
are able to implement and administer Global Fund grants. The issues GAO 
addresses in this report go to the heart of the Global Fund's ability 
to develop and use effective tools to respond to such performance 
variability. 

We have worked diligently on the Global Fund Board and with the Global 
Fund Secretariat to address the issue of documentation of performance, 
and are pleased the GAO sees a marked improvement in this area, as we 
do ourselves. The GAO notes, however, that it did not evaluate the 
appropriateness or accuracy of the judgments made by the Global Fund 
Secretariat based on the documents the GAO reviewed. It also did not 
comment on whether the Global Fund Secretariat appropriately adjusted 
the budgets of grants to reflect material reprogramming in each grant. 
In addition, we remain concerned by the paucity of information on the 
performance of sub-recipients of Global Fund grants. 

We have also worked consistently on the Global Fund Board to urge an 
expanded and more consistently active role for Local Fund Agents 
(LFAs), and we welcome the report's specific recommendations in this 
area. We concur with the need for the Global Fund to establish 
standardized expectations for LFA performance, and believe these 
expectations should include a specific instruction to LFAs to look 
beyond financial management and examine program management and the 
delivery of quality interventions, including on-site verification of 
sub-recipients' activities. The examination by LFAs of program 
implementation and financing of grant activities, as a standard 
practice, would provide critical information for the Secretariat to 
make fully informed and consistent decisions about disbursements and 
possible adjustments to grant budgets. 

We would like to note that the Global Fund Secretariat has commissioned 
a study of the LFA system, which it presented at the Meeting of the 
Board in April 2007. 

The U.S. Delegation urged our Board colleagues to adopt concrete 
recommendations from this and other studies to improve the 
accountability and transparency of Global Fund activities at the 
country level. 

Finally, we are very appreciative of the report's insights into the 
Global Fund Secretariat's efforts to develop an early warning system 
for grants that are experiencing problems. USAID, HHS, OGAC, and U.S. 
Government country teams in the field all have mechanisms to provide 
necessary technical assistance to Global Fund grants. Unfortunately, 
the lack of a risk-assessment and early-warning system at the Global 
Fund Headquarters in Geneva has hampered our ability to offer timely 
technical assistance and support to grants that are experiencing 
implementation bottlenecks. We plan to continue working directly with 
the Global Fund Secretariat, as well as through multilateral groups 
such as the Global Implementation Support Team (GIST), to help the 
Global Fund refine and improve its oversight mechanisms, and to develop 
an effective system to identify poorly performing grants quickly so as 
to allow Global Fund grantees to use and fully benefit from these and 
other technical-assistance resources. 

Given that the U.S. Government has provided roughly one-third of all 
total Global Fund contributions to date, the Coordinator's office takes 
very seriously every aspect of the Global Fund's ability to use U.S. 
taxpayer money in the most efficient and effective way possible. The 
GAO Report has made a valuable contribution to our long-term efforts to 
help the Global Fund achieve fully its enormous potential to aid in the 
global fight against HIV/AIDS, tuberculosis and malaria. 

Drafted: MJeffers, S/GAC: 

Clearances: 

RM/GAO: JSchinnick: 
MMcche, S/GAC - OK: 
TWalsh, S/GAC - OK: 
WSteiger, HHS - OK: 

Other clearances: 

JKolker, S/GAC - OK: 
GSteele, USAID - OK: 
MWynne, HHS - OK: 
JWright, USAID - OK: 
PMamacos, S/GAC - OK: 
ALion, S/GAC - OK: 
CNeary, H - OK: 

[End of section] 

Appendix V: GAO Contact and Staff Acknowledgments: 

GAO Contact: 

David Gootnick (202) 512-3140: 

Staff Acknowledgments: 

In addition to the person named above, Audrey Solis, Assistant 
Director; Tom Zingale; Jeffrey Baldwin-Bott; Bruce Kutnick; Barbara 
Steel-Lowney; David Dornisch; and Reid Lowe made key contributions to 
this report. Kathryn Bernet, Antoine Clark, Etana Finkler, Hynek 
Kalkus, and Tracy Guerrero provided technical support. 

FOOTNOTES 

[1] United States Leadership Against HIV/AIDS, Tuberculosis, and 
Malaria Act of 2003, Pub. L. No. 108-25, § 202 (f), 117 Stat. 711, 727 
(codified at 22 U.S.C. § 7622). 

[2] The June 2005 report on the Global Fund was our first review in 
response to the mandate. See GAO, 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, GAO-05-639 
(Washington, D.C.: June 2005). We also completed a report in 2003 on 
the Global Fund at the request of the Chairman, Committee on 
Appropriations, Subcommittee on Foreign Operations, Export Financing, 
and Related Programs. See GAO, 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 2003). This report 
is our final response to the 2003 mandate. 

[3] Risks faced by Global Fund grants include problems associated with 
operating in countries with varying levels of economic development and 
capacity, which can affect grant effectiveness. 

[4] The Global Fund's Board approves grant proposals covering up to a 5-
year period and initially commits grants for the first 2-year phase of 
the proposal period. Continued grant funding for phase 2 is conditioned 
on program performance, based on a review of performance reports and 
other information taken 20 months after the grant program's start date. 

[5] See Committee of Sponsoring Organizations of the Treadway 
Commission, Enterprise Risk Management --Integrated Framework Executive 
Summary: 2004. 

[6] As a financing entity, the Global Fund relies on partners to 
provide technical support to grant recipients. Its key partners include 
UNAIDS, OGAC, the World Bank, and the World Health Organization (WHO). 

[7] According to the Global Fund's disbursement decision-making form, 
contextual information critical to disbursement decisions includes 
qualitative factors relating to governance, grant management, and 
external factors. This form, together with the principal recipient's 
report on the achievement of all individual targets and the LFA's 
verification is the documented basis for funding decisions during 
implementation. 

[8] The Global Fund maintains a file for each grant that contains, 
among other things, all reports relating to that grant's performance, 
funding requests, and disbursement and phase 2 assessments and funding 
decisions. 

[9] For both samples the estimate was 100 percent. For each of these 
estimates we are 95 percent confident that at least 94 percent of all 
files in our population contain narratives explaining the manager's 
rating of the grant's performance. 

[10] Good practice suggests that organizations should monitor their 
contractors' performance during the course of interaction and 
periodically evaluate performance based on clear expectations. 
Assessment results should include consistent patterns of rewards, 
penalties, or both. (See app. II for sources of these criteria.) 

[11] UNAIDS and WHO estimate that 39.5 million people were living with 
HIV in 2006 and that 2.9 million people died of AIDS-related illnesses 
in 2006. WHO estimates that malaria kills more than 1 million people 
per year and that 124 million people in Africa live in areas that are 
at risk for seasonal malaria epidemics. WHO also estimates that 1.7 
million people die of TB each year. 

[12] (RED)™ is a private sector initiative to provide financing for 
Global Fund HIV/AIDS projects in Africa. Companies participating in the 
initiative donate a portion of profits from the sale of (RED) branded 
items. 

[13] 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 healthcare 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. 

[14] Between 2003 and 2006 the Global Fund secretariat staff increased 
from 63 to 240 employees. 

[15] Government agencies are the principal recipients of 64 percent of 
grant funds. Nonprofit development organizations and multilateral 
organizations also act as principal recipients. In many cases the 
principal recipient further distributes the funds to multiple 
subrecipients to implement grant activities. 

[16] As of 2007, the Global Fund had contracted with the following 
organizations to perform LFA oversight duties: PricewaterhouseCoopers, 
KPMG, Emerging Markets Group, Crown Agents, the Swiss Tropical 
Institute, and the United Nations Office for Project Services. 
PriceWaterhouseCoopers and KPMG together account for LFA services in 97 
of 120 countries and regional programs. 

[17] In addition to 113 country programs, LFAs oversee grants in 1 
multicountry program in Africa 5 multicountry programs in Latin America 
and the Caribbean, and 1 multicountry program in the Western Pacific. 

[18] The specific responsibilities delegated to the LFA central team, 
LFA country team, and outside experts sometimes vary from one LFA 
organization to another. For example, of the two firms with the largest 
portfolios, one uses a decentralized approach in which the majority of 
the work occurs within the country team, and the other uses a 
centralized approach in which the country teams perform the oversight 
tasks, but all LFA products are vetted through the central team before 
reaching the secretariat. Using a different approach, one of the 
smaller LFA organizations has very limited presence within the 
recipient countries; instead, it sends specialists into the country to 
perform oversight activities as needed. 

[19] A disbursement greater than $2 million requires a decision by the 
secretariat's Director of Operations. 

[20] Fund portfolio managers, with recommendations from LFAs, give 
performance ratings that range from A (expected or exceeding 
expectations), B1 (substantial achievements made), B2 (little progress 
made), C (unacceptable). 

[21] In preparation for the phase 2 grant renewal decision, Global Fund 
staff prepare a summary of information from the grant recipient, LFA, 
portfolio manager, performance evaluation team, and secretariat 
financial staff on grant performance. 

[22] The Global Fund calls such changes material reprogramming. 

[23] All percentage estimates based on this sample provided in this 
report have 95 percent confidence intervals of within plus or minus 13 
percentage points. See appendix I for more information on our sampling 
methodology. 

[24] For both samples the estimate was 100 percent. For each of these 
estimates we are 95 percent confident that at least 94 percent of all 
files in our population contain narratives explaining the manager's 
rating of the grant's performance. 

[25] LFAs, portfolio managers, and evaluation staff make phase 2 
funding recommendations (Go, Conditional Go, or No Go). The Global Fund 
Board of Directors reviews these recommendations and makes the final 
phase 2 recommendation to renew the grant, not to renew the grant, or 
to renew the grant with conditions attached. Global Fund officials said 
that differences between ratings and proposed funding levels are common 
and do not necessarily indicate mistakes or poor judgment by LFAs, 
portfolio managers, or staff from the evaluation team. They said, for 
example, that after LFAs have completed their assessments, LFAs and 
fund portfolio managers often receive new information about grant 
performance that leads them to propose a different phase 2 amount than 
originally recommended by the LFA. 

[26] Fund portfolio managers and the evaluation staff gave the majority 
of the phase 2 grants matching ratings. They concurred on about 73 
percent of their phase 2 grant renewal recommendations. 

[27] We estimated that in almost half of grant disbursement files, the 
fund portfolio manager disagreed with the amount recommended by the LFA 
or the amount requested by the grant recipient. 

[28] GAO-05-639. 

[29] According to international standards, risk assessment reduces 
operational surprises and losses and enhances an organization's ability 
to identify potential concerns and establish appropriate responses. See 
Committee of Sponsoring Organizations of the Treadway Commission, 
Enterprise Risk Management --Integrated Framework Executive Summary, 
2004. 

[30] GAO-05-639. 

[31] Global Fund officials gave us a sample LFA contract and said that 
its contracts with the six LFAs were very similar. 

[32] The Global Fund secretariat began piloting training courses for 
fund portfolio managers in 2006 and told us that a module on LFAs would 
be added to this training series in the future. 

[33] Good practice for overseeing contractors suggests that 
contractors' fulfillment of established expectations should be 
systematically measured. See appendix II. 

[34] Mentors are individuals from country teams that the central team 
has identified as high performers. 

[35] Challenges and Opportunities for the New Executive Director of the 
Global Fund - Seven Essential Tasks" by Steve Radelet et.al. 
(Washington, D.C.: Oct. 2006). 

[36] Of the 12 country teams that participated in our structured 
interviews, almost all team members had financial expertise but limited 
training in procurement or monitoring and evaluation. 

[37] The Global Fund drafted a questionnaire that a contractor tested 
and administered anonymously in a Web-based survey from November 9 to 
16, 2006 to the approximately 120 Geneva-based Global Fund secretariat 
staff who use LFA services. The 75 staff who responded rated their 
agreement on more than 50 statements about LFA-related issues using a 
five-point scale of "Strongly Disagree, Disagree, Neither Agree nor 
Disagree, Agree, Strongly Agree" while being given the option on most 
questions of not answering if they had "Insufficient experience to form 
an opinion." We report responses for the 51 operations staff, all of 
whom had direct contact with LFAs on a range of issues. 

[38] The Global Fund categorizes targets into three levels of 
complexity. The first two levels are considered to be "process" 
indicators, and include measures such as "people trained" or "service 
points supported." The third, more complex category, denotes "coverage" 
indicators and measures the number of individuals receiving services. 
The Global Fund is also considering the most appropriate way to measure 
"impact" indicators. 

[39] We did not consider grants for the disbursement sample that 
received their first disbursement of funds during the period so our 
results were not skewed by problems that commonly accompany grants when 
they start. 

[40] A limitation of our analysis was that we did not evaluate the 
adequacy of the information provided, as determining adequacy would 
have required us to make judgments requiring substantial additional 
grant-specific information not contained in the grant files. 

[41] Government Performance and Results Act of 1993, Pub. L. No. 103- 
62, 107 Stat. 285. 

[42] Results from our nonprobability sample cannot be used to 
generalize to the overall population of LFA country teams because, in a 
nonprobability sample, some elements of the population being studied 
have no chance or an unknown chance of being selected as part of the 
sample. 

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