oversight

Global Health: Global Fund to Fight AIDS, TB and Malaria Has Advanced in Key Areas, but Difficult Challenges Remain

Published by the Government Accountability Office on 2003-05-07.

Below is a raw (and likely hideous) rendition of the original report. (PDF)

             United States General Accounting Office

GAO          Report to the Honorable Jim Kolbe
             Chairman, Subcommittee on Foreign
             Operations, Export Financing, and Related
             Programs, Committee on Appropriations,
             House of Representatives
May 2003
             GLOBAL HEALTH
             Global Fund to Fight
             AIDS, TB and Malaria
             Has Advanced in Key
             Areas, but Difficult
             Challenges Remain




GAO-03-601
             a
                                               May 2003


                                               GLOBAL HEALTH

                                               Global Fund to Fight AIDS, TB and Malaria
Highlights of GAO-03-601, a report to the
Chairman, Subcommittee on Foreign              Has Advanced in Key Areas, but Difficult
Operations, Export Financing, and Related
Programs, House Committee on
Appropriations
                                               Challenges Remain


                                               •   The Fund has made noteworthy progress in establishing essential governance
By the end of 2002, more than 40                   and other supporting structures and is responding to challenges that have
million people worldwide were                      impeded its ability to quickly disburse grants. A key challenge involves locally
living with human immunodeficiency                 based governance structures, many of which are not currently performing in a
virus/acquired immunodeficiency                    manner envisioned by the Fund.
syndrome (HIV/AIDS), with 5
                                               •   The Fund has developed comprehensive oversight systems for monitoring and
million newly infected that year.
                                                   evaluating grant performance and ensuring financial accountability and has
HIV/AIDS, along with tuberculosis
                                                   issued guidance for procurement; however, the oversight systems face
(TB) and malaria, causes nearly 6
                                                   challenges at the country level and some procurement issues have not been
million deaths per year and untold
                                                   finalized.
human suffering. Established in
                                               •   The Fund’s ability to approve and finance additional grants is threatened
January 2002, the Global Fund (the
                                                   by a lack of sufficient resources. Pledges made through the end of 2003
Fund) aims to rapidly disburse grants
                                                   are insufficient to cover more than a small number of additional grants
to augment existing spending on the
                                                   and without significant new pledges, the Fund will be unable to support
prevention and treatment of these
                                                   all of the already approved grants beyond their initial 2-year agreements.
three diseases while maintaining
                                               Pledges Made, Amount Received, and Grant Proposals Approved
sufficient oversight of financial
transactions and program
effectiveness. As of April 1, 2003,
the United States had pledged $1.65
billion to the Fund and is expected to
remain its single largest donor. In
this study, GAO was asked to assess
(1) the Fund’s progress in developing
governance structures; (2) the
systems that the Fund has developed
for ensuring financial accountability,
monitoring and evaluating grant
projects, and procuring goods and
services; (3) the Fund’s efforts to
raise money; and (4) its grant-making
process.

In responding to our draft report, the
Fund, the Department of Health and                 a
                                                       The pledges expected through 2008 include $173 million that has no specified arrival date.
Human Services, the Department of
State, and the U.S. Agency for                     b
                                                   These numbers represent the maximum amount approved by the board. Final budgets may be reduced
International Development agreed                   during grant negotiations. Five-year figures are potential, rather than guaranteed, commitments.
with our findings.
                                                   Note: A shortfall in the funding of already approved grants is evident when 5-year commitments are
                                                   compared with total pledges over this time frame. The small amount of resources available for funding
                                                   new grants is evident when comparing 2-year commitments with pledges through 2003.
                                               •   Improvements in the Fund's grant-making processes have enhanced its ability
www.gao.gov/cgi-bin/getrpt?GAO-03-601.
                                                   to achieve its key objectives, but challenges remain. These challenges include
To view the full report, including the scope       ensuring that grants add to and complement existing spending on HIV/AIDS,
and methodology, click on the link above.
For more information, contact David Gootnick
                                                   TB, and malaria and that recipients have the capacity to effectively use grants.
at (202) 512-3149 or gootnickd@gao.gov.
Contents



Letter                                                                                                1
                             Results in Brief                                                         2
                             Background                                                               5
                             The Fund Has Established Key Governance Structures, but
                               Implementation Challenges Impede Ability to Rapidly Disburse
                               Funds                                                                  7
                             The Fund Developed Comprehensive Oversight Systems and Issued
                               Procurement Guidance, but Systems Face Challenges, and
                               Guidance Is Still Evolving                                            20
                             Lack of Resources Threatens Fund’s Ability to Continue to Approve
                               and Finance Grants                                                    32
                             Improvements in Grant-Making Processes Enhance Fund’s Ability to
                               Achieve Key Objectives, but Challenges Remain                         36
                             Agency Comments and Our Evaluation                                      44


Appendixes
               Appendix I:   Objectives, Scope, and Methodology                                      45
              Appendix II:   Status of Round 1 Grants                                                48
             Appendix III:   Drug Procurement Cycle                                                  54
              Appendix IV:   Indicators of Need for Recipient Countries                              56
              Appendix V:    Comments from the Global Fund to Fight AIDS, TB and
                             Malaria                                                                 60
             Appendix VI:    Joint Comments from the Departments of Health and Human
                             Services and State, and the U.S. Agency for International
                             Development                                                             67
             Appendix VII:   GAO Contact and Staff Acknowledgments                                   69
                             GAO Contact                                                             69
                             Staff Acknowledgments                                                   69


Tables                       Table 1: The Secretariat’s Budget for 2003                              12
                             Table 2: Signed Grant Agreements—Funds Committed and
                                      Disbursed                                                      48
                             Table 3: Grant Agreements in the Pipeline                               52
                             Table 4: Grant Agreements Pending, but Less Far Along in the
                                      Process                                                        53




                             Page i                                             GAO-03-601 Global Health
          Contents




Figures   Figure 1:   Timeline of the Fund’s First Year                                               6
          Figure 2:   Approved Grants, by Disease and by Region                                       7
          Figure 3:   Governance Structure of the Fund as of April 1, 2003                            8
          Figure 4:   The Structure of the Fund’s Board as of April 1, 2003                          10
          Figure 5:    Anticipated Grant Expenditures for Drugs and Health
                      Products                                                                       27
          Figure 6:   Anticipated Expansion in Approved Proposal Dollars
                      through 2004 (actual and estimated 2-year
                      commitments)                                                                   33
          Figure 7:   Pledges Made, Amount Received, and Grant Proposals
                      Approved                                                                       35
          Figure 8:   Global Fund Proposal Review Process                                            37
          Figure 9:   Grant Money by Country Income Level                                            38




          Abbreviations

          CCM      Country Coordinating Mechanism
          HIV/AIDS Human immunodeficiency virus/acquired immunodeficiency
                   syndrome
          LFA      Local Fund Agent
          NGO      Nongovernmental organization
          OECD     Organization for Economic Cooperation and Development
          TB       Tuberculosis
          TRP      Technical Review Panel
          UN       United Nations
          UNAIDS Joint U.N. Program on HIV/AIDS
          UNDP     U.N. Development Program
          UNOPS    U.N. Office for Project Services
          USAID    U.S. Agency for International Development
          WHO      World Health Organization


           This is a work of the U.S. Government and is not subject to copyright protection in the
           United States. It may be reproduced and distributed in its entirety without further
           permission from GAO. It may contain copyrighted graphics, images or other materials.
           Permission from the copyright holder may be necessary should you wish to reproduce
           copyrighted materials separately from GAO’s product.




          Page ii                                                          GAO-03-601 Global Health
A
United States General Accounting Office
Washington, D.C. 20548



                                    May 7, 2003                                                                                   Leter




                                    The Honorable Jim Kolbe
                                    Chairman, Subcommittee on Foreign Operations,
                                     Export Financing, and Related Programs
                                    Committee on Appropriations
                                    House of Representatives

                                    Dear Mr. Chairman:

                                    By the end of 2002, more than 40 million people worldwide were living with
                                    human immunodeficiency virus/acquired immunodeficiency syndrome
                                    (HIV/AIDS), with 5 million newly infected that year. HIV/AIDS, along with
                                    tuberculosis (TB) and malaria, causes nearly 6 million deaths per year and
                                    untold human suffering. In addition, these diseases, if unchecked, are
                                    increasingly seen as a threat to economic growth, with the potential to
                                    worsen conflict and political instability in many parts of the world.
                                    According to the United Nations (U.N.), about $10 billion will be needed in
                                    2005, increasing to $15 billion in 2007, to fight AIDS alone; malaria and
                                    tuberculosis will require billions more. In January 2002, the Global Fund to
                                    Fight AIDS, Tuberculosis and Malaria (“the Fund”) was established in
                                    Geneva, Switzerland. The Fund aims to rapidly disburse grants to augment
                                    existing spending on the prevention and treatment of these three diseases
                                    in developing countries while maintaining sufficient oversight of financial
                                    transactions and program effectiveness.

                                    As of April 1, 2003, the United States had pledged $1.65 billion to the Fund1
                                    and is the single largest donor. Because of this significant commitment of
                                    U.S. resources, you requested that we report on the Fund’s progress during
                                    its first full year of operation. This report assesses (1) the Fund’s progress
                                    in developing governance structures; (2) the systems that the Fund has
                                    developed for ensuring financial accountability, monitoring and evaluating
                                    grant projects, and procuring goods and services; (3) the Fund’s efforts to
                                    mobilize resources; and (4) the Fund’s grant-making processes.




                                    1
                                     Through fiscal year 2003 the United States had appropriated up to $650 million to the Fund
                                    and has pledged an additional $1 billion over 5 years, beginning in 2004.




                                    Page 1                                                           GAO-03-601 Global Health
                   As part of our review, we analyzed documents and interviewed key officials
                   from the Fund; the Joint U.N. Program on HIV/AIDS (UNAIDS); the World
                   Health Organization (WHO); the U.N. Development Program; and experts
                   on project implementation and procurement. We obtained perspectives on
                   the progress and evolution of the Fund from officials at the Department of
                   State, the U.S. Agency for International Development, and the Department
                   of Health and Human Services, as well as the directors of the Global
                   Business Coalition on HIV/AIDS, the Earth Institute of Columbia
                   University, the Gates Foundation HIV/AIDS and TB Program, and the
                   Global AIDS Alliance. We also conducted research and reviewed data on
                   global spending on HIV/AIDS, TB, and malaria. In addition, we visited Haiti,
                   Honduras, Ethiopia, and Tanzania to meet with principle recipients of Fund
                   grants and members of the country coordinating bodies that will be
                   implementing activities supported by Fund grants.2 In Haiti and Tanzania,
                   we also met with the private sector firms that have contracted to serve as
                   local agents for the Fund in these countries. (App. I provides a more
                   detailed description of our objectives, scope, and methodology.)



Results in Brief   The Fund has made noteworthy progress in establishing essential
                   governance and other supporting structures and is responding to
                   challenges that have impeded its ability to quickly disburse grants. In its
                   first year of operation, the Fund successfully established a board of
                   directors, a permanent secretariat, and a grant review process. It called on
                   countries to establish governance structures to develop, implement, and
                   oversee grants. The principal country-level governance structure, the
                   Country Coordinating Mechanism (CCM), is designed to provide a forum
                   for all stakeholders to (1) review and submit proposals and (2) follow the
                   progress of Fund-supported programs. However, as of late 2002, in three of
                   the four countries we visited there was limited communication between the
                   secretariat and the CCM and between CCM leadership and other members.
                   These communication problems and the evolving nature of the country-
                   level structures resulted in key participants being unsure of their roles in
                   the proposal process and unprepared to support grant implementation. In


                   2
                    We do not name individual countries in the text of this report, given the early stages of Fund
                   activities in these countries. Of these four countries, Haiti and Tanzania were selected as
                   two of the “fast track” countries that were close to having signed grant agreements during
                   our field visits. Ethiopia and Honduras were less far along in the process and therefore
                   represent most of the remaining countries that had proposals approved in the first round
                   vetted by the Fund.




                   Page 2                                                              GAO-03-601 Global Health
one country, the CCM was better prepared largely because it had received a
high level of support from Fund staff and strong leadership from the CCM
chair; however, the Fund does not have sufficient resources to provide this
level of support to all CCMs. The Fund has acknowledged the difficulties
experienced by CCMs and is addressing them by clarifying its guidance to
CCMs through regional workshops and working with local partners such as
bilateral and multilateral donors. At the headquarters level, to benefit from
some of the tax and employment advantages of an international
organization, the secretariat of the Fund has relied on the regulations and
systems governing the U.N. WHO. However, this administrative
relationship has contributed to delays in disbursing grants and
uncertainties for Fund staff concerning responsibility and accountability.
The Fund is exploring the possibility of gaining additional concessions
from Swiss authorities that would eliminate the need for this relationship.

The Fund has developed comprehensive oversight systems for monitoring
and evaluating grant performance and ensuring financial accountability
and has issued guidance for procurement; however, the oversight systems
face challenges at the country level and some procurement issues have not
been finalized. The Fund has recognized these challenges and is working to
address them. The Fund’s principal oversight entity at the country level, the
Local Fund Agent (LFA), is a Fund contractor that is responsible for
ensuring that grant recipients account for the money they spend and
measure progress they make in fighting disease. The LFA is also
responsible for assessing recipients’ ability to procure goods and services.
However, the introduction of this new mechanism has been marked by
controversy and misconceptions regarding its oversight role. These
problems have delayed the designation of LFAs in some countries, slowing
the implementation of grants. For example, several government officials in
one of the countries we visited believed, incorrectly, that a government
ministry would be permitted to perform the LFA functions. Moreover, in
countries with a limited number of qualified personnel and organizations,
LFAs will face the challenge of maintaining the independence necessary to
avoid real or perceived conflicts of interest. Regarding procurement, the
Fund has provided requirements in the agreements that each grant
recipient must sign. These requirements are focused primarily on
procurement of drugs and public health products in an effort to ensure
quality, safety, and the lowest possible prices. The agreements also contain
general but less extensive requirements on procuring goods and services,
including nonmedical items such as vehicles and office equipment. The
Fund encourages recipients to abide by national laws and international




Page 3                                                 GAO-03-601 Global Health
obligations but does not explicitly address this issue in the grant
agreements.

A lack of sufficient resources threatens the Fund’s ability to approve and
finance additional grants. Although the Fund has announced plans to
award new grants in its third round of proposals in October 2003, pledges
made through this year as of April 1, 2003, are insufficient to cover more
than a small number of additional grants. The Fund has less than $300
million to support commitments in round 3—significantly less than the
$608 million in 2-year grants approved by the board of directors in the first
round and the $884 million approved in the second round. On the basis of
the number of technically sound proposals it expects to receive and
approve in future rounds, and the amount pledged as of April 1, 2003, the
Fund projects that it will require $1.6 billion in new pledges in 2003 and
$3.3 billion in 2004. In addition, without significant new pledges, the Fund
will be unable to support all of the already approved grants beyond the
initial 2-year agreements. If all currently approved grants demonstrate
acceptable performance after 2 years, the Fund will require $2.2 billion
more to assist these programs for an additional 1 to 3 years. These grants
seek to provide, among other things, AIDS medications to 500,000 people
and care and support to 500,000 AIDS orphans and other vulnerable
children.

Improvements in the Fund's grant-making processes have enhanced its
ability to achieve its key objectives, but challenges remain. Grant decisions
are made by the board, based primarily on a technical evaluation of
submitted proposals. Between the first and second proposal rounds, the
Fund made several improvements and adjustments to its proposal review
and decision-making process. These include revising the application
materials, altering eligibility criteria to focus on the most needy countries,
and adding additional members to the technical evaluation panel to
increase its overall knowledge base and better prepare it to evaluate
nonmedical, development-related issues. However, ongoing challenges to
the grant decision process have been identified by the Fund and
stakeholders, including ensuring that grants augment existing spending on
HIV/AIDS, TB, and malaria and that recipients have sufficient capacity to
effectively use the grants. The Fund has recognized these challenges, but
its efforts to address them are still evolving.

In responding to our draft report, the Fund, the Department of Health and
Human Services, the Department of State, and the U.S. Agency for
International Development (USAID) agreed with our findings. The Fund



Page 4                                                  GAO-03-601 Global Health
             discussed steps it is taking to address the challenges identified in our
             report and identified several additional challenges.



Background   HIV/AIDS, TB, and malaria, three of the world’s deadliest infectious
             diseases, cause tremendous human suffering, economic loss, and political
             instability. According to UNAIDS, in 2002 AIDS caused 3 million deaths,
             and 5 million people became infected. More than 70 percent, or 28.5
             million, of the 40 million people with HIV/AIDS worldwide live in sub-
             Saharan Africa. However, according to a report by the National Intelligence
             Council, HIV infections in just five populous countries—China, India,
             Nigeria, Russia, and Ethiopia—will surpass total infections in central and
             southern Africa by the end of the decade. In addition, Thailand, a
             developing country that had successfully countered the growth of AIDS in
             the 1990s, is now facing a resurgent epidemic. According to WHO, after
             HIV/AIDS, TB is the world’s leading infectious cause of adult mortality,
             resulting in as many as 2 million deaths per year. Like HIV/AIDS,
             tuberculosis primarily affects the most economically active segment of the
             population, with 75 percent of the annual deaths occurring in those
             between the ages 15 and 54. Conversely, malaria, which causes more than 1
             million deaths and at least 300 million cases of acute illness each year, is a
             leading cause of death in young children. The disease exerts its heaviest
             toll in Africa, where about 90 percent of malaria deaths occur.

             The Fund was formally launched in January 2002. The Fund is a grant-
             making organization with the purpose of attracting, managing, and
             disbursing funds that will increase existing resources and make a
             sustainable and significant contribution to the reduction of infections,
             illness, and death. The Fund aims for an integrated and balanced approach,
             covering prevention, treatment, care, and support, and seeks to establish
             efficient and effective disbursement mechanisms. During its first full year
             of operation, the Fund successfully completed two proposal rounds and
             began distributing grant money.




             Page 5                                                  GAO-03-601 Global Health
Figure 1: Timeline of the Fund’s First Year
     Global Fund launched                  First round of grants approved                                          First grant           Second round of
     from Geneva                                                                                                   agreements signed     grants approved
                                           Dr. Richard Feachem appointed
                                           as Executive Director of the Fund




       1/02                                  4/02                                                                  11/02                   1/03
 Source: GAO analysis of Fund documents.



                                                                Over the course of these two proposal rounds, the Fund approved grants to
                                                                153 proposals in 81 countries across the major regions of the world (see fig.
                                                                2).3 These grants total nearly $3.7 billion ($1.5 billion over the first 2 years)
                                                                and cover all three diseases.




                                                                3
                                                                 This country total does not include one global grant and grants to two regions.




                                                                Page 6                                                                 GAO-03-601 Global Health
Figure 2: Approved Grants, by Disease and by Regiona
 Grant dollars by disease                                       Grant dollars by region
                                                                                                                    1%
                                                                                                                    Middle East and
                                                  1%                                                                North Africa
                                                  All                                                               6%
                                                                                                                    South Asia
                                 •                3%                                      •                         7%
                                                  TB/AIDS                                                           Europe and
                                      13%                                                      •                    Central Asia
                                        •
                                                  TB                                               •                10%
                                                                                                                    Latin America and
                                        18%                                                                         the Caribbean
                                          •
          65%                                                          61%                     15%
            •                                                            •                       •
                                                                                                                    East Asia and
                                                                                                                    the Pacific




                                                  Malaria
                                                                                                                    Sub-Saharan
                                                  AIDS                                                              Africa

 Source: GAO analysis of Fund data.

                                              a
                                              Based on maximum allowable grant money for the full length of board-approved programs.




The Fund Has                                  In its first year, the Fund developed and established key governance and
                                              other supporting structures, including a board of directors, a permanent
Established Key                               secretariat, a grant review process, and country-level structures required to
Governance                                    develop, implement, and oversee grants. However, limited communication,
                                              administrative complications, and the evolving nature of these new
Structures, but                               structures, especially at the country level, led to a lack of clarity over roles
Implementation                                and responsibilities and slowed the Fund’s ability to sign the initial grant
Challenges Impede                             agreements. The Fund has recognized these problems and is taking steps at
                                              both the country and headquarters levels to address them.
Ability to Rapidly
Disburse Funds



                                              Page 7                                                              GAO-03-601 Global Health
Key Governance and Other   The Fund has made noteworthy progress in establishing key headquarters
Supporting Structures      and country-level governance structures. Figure 3 illustrates the
                           governance structure of the Fund.
Established


                           Figure 3: Governance Structure of the Fund as of April 1, 2003
                                                                               Headquarters Level

                                                                                       Board




                                    Technical Review                                                                          Trustee
                                                                                    Secretariat
                                         Panel                                                                              (World Bank)




                                                                                  Country Level


                                                       Country Coordinating Mechanism (CCM)

                                  Government               Private sector            Civil society         Donors                 Local Fund
                                  (e.g., Ministry        (e.g., Chamber of         (e.g., faith-based   (multilateral and           Agent
                                    of Health)              Commerce)                    groups)           bilateral)




                                                                     Principal recipient(s)




                                                                       Subrecipient(s)



                           Source: GAO analysis of Fund documents.


                           Notes: WHO and UNAIDS assist the technical review panel with data and other expertise. The Fund
                           has entered into an agreement with WHO for the provision of administrative services at the
                           headquarters level.
                           The arrows denote relationships but do not specify their nature, e.g., information or money flow vs.
                           accountability. The relationships among the components of this governance structure are detailed
                           below in the paragraphs on each component.




                           Page 8                                                                                GAO-03-601 Global Health
At the headquarters level, governance structures include a board of
directors, a permanent secretariat, a Technical Review Panel (TRP), and
the World Bank as its trustee.

• The board is the governing body of the Fund, consisting of 18 voting
  members and 5 nonvoting members. The voting members consist of
  seven government representatives from developing countries, seven
  government representatives from donor countries, and one
  representative each from a developing country nongovernmental
  organization (NGO), a developed country NGO, the private sector, and
  private foundations. The five nonvoting members consist of a
  representative from WHO, the World Bank (as trustee, see below),
  UNAIDS, a person representing communities living with HIV/AIDS, TB,
  or malaria, and one Swiss citizen appointed by the board.4 The board
  makes all funding decisions; sets Fund policies, strategies, and
  operational guidelines; and selects the executive director of the
  secretariat. The board chair and vice chair rotate between beneficiary
  and donor country representatives. In January 2003, the U.S. Secretary
  of Health and Human Services was elected to serve as chairman,
  replacing the outgoing chairman from Uganda. Figure 4 illustrates the
  current structure of the Fund’s board.




4
 According to the Fund, Swiss authorities generally require that a Swiss citizen with his or
her domicile in Switzerland sit on the board of directors of a foundation registered in
Switzerland. The Fund is a foundation registered in Switzerland.




Page 9                                                             GAO-03-601 Global Health
Figure 4: The Structure of the Fund’s Board as of April 1, 2003

                                                      Chair
                                  U.S. Secretary of Health and Human Services
                                                   Vice Chair
                          Deputy Permanent Secretary, Ministry of Public Health, Thailand


                                                 Voting members



  Donor voting group                                          Beneficiary voting group
  7 Government representatives                                7 Government representatives
  European Commission (Belgium, Austria)                      Ukraine (Eastern Europe)
  France (Germany, Luxembourg, Spain)                         Pakistan (Eastern Mediterranean Region)
  Italy                                                       Uganda (Eastern & Southern Africa)
  Japan                                                       Brazil (Latin America and the Caribbean)
  Sweden (Denmark, Ireland, Netherlands,                      Thailand (South East Asia)
  Norway)                                                     Nigeria (West and Central Africa)
  United Kingdom (Canada, Switzerland)                        China (Western Pacific Region)
  USA
                                                              2 NGO representatives
  2 Private sector representatives                            Health Rights Action Group (developing country)
  McKinsey & Company                                          French NGO AIDES (developed country)
  Bill & Melinda Gates Foundation




                                    Nonvoting members
                                    1 Representative of communities affected
                                       by the diseases
                                    1 WHO representative
                                    1 World Bank representative
                                    1 UNAIDS representative
                                    1 Swiss citizen appointed by the board



Source: GAO analysis of Fund documents.


Note: Board members from beneficiary countries represent a region, which is identified after each
country listed. Membership on the board as a donor is based on contributions, and members can
represent an individual country or a group of countries. (Countries may be grouped on the basis of
common interests or geographic proximity.)


The board plans to meet three times per year and strives to make decisions
by consensus. When consensus cannot be reached, any voting member can
call for a vote. Successful motions require approval from a two-thirds
majority of those present, representing both donor and recipient voting
groups, which means that the current voting structure may make it difficult
to reach a decision. For example, the only time the board brought an issue
to a vote a decision was not reached because the members could not get a
sufficient number of affirmative votes.




Page 10                                                                          GAO-03-601 Global Health
The board has established four committees: (1) Governance and
Partnership, (2) Resource Mobilization and Communications, (3) Portfolio
Management and Procurement, and (4) Monitoring and Evaluation,
Finance, and Audit. The committees respond to issues raised by the board
and identify options for addressing them. For example, the Portfolio
Management and Procurement Committee has developed a proposal
appeals process. The United States has representatives on three of the four
committees (Governance and Partnership; Portfolio Management and
Procurement; and Monitoring and Evaluation, Finance, and Audit).

The secretariat has hired 63 staff as of April 1, 2003, to run the day-to-day
operations of the Fund.5 As the Fund’s only full-time body, the secretariat
receives and screens grant applications, studies and recommends
strategies to the board, communicates board decisions to stakeholders,
manages and oversees regional grant portfolios, receives and reviews
program and financial reports submitted by grant recipients through the
LFA, and performs all administrative functions for the Fund. The board
reviews and approves the secretariat’s business plan and budget. In
January 2003, the board approved a $38.7 million budget for 2003 for the
secretariat (see table 1).




5
 About half of these staff have been hired for 2-year terms; five have been seconded from
other organizations; and the rest have been hired for shorter lengths of time. The secretariat
has budgeted for 73 full-time staff.




Page 11                                                            GAO-03-601 Global Health
Table 1: The Secretariat’s Budget for 2003

Dollars in millons
                                                                              Percentage
Item                 Description                                      Cost     of budget
Local Fund           Based on estimates for the                      $16.4            42%
Agent fees           assessment of principal recipients and
                     annual oversight work per grant
Staff                Includes salaries and benefits                   11.0                28
Professional         Includes $2 million in fees to the World          5.0                13
services             Bank as trustee and $725,000 to WHO
                     for administrative services
Travel               Includes secretariat and board travel             2.1                  5
Other                Includes facilities, communication                4.3                11
                     materials, information technology
                     infrastructure, meetings, fixed assets,
                     and other items
Total                                                               $38.7a          100%a
Source: GAO analysis of Fund documents.
a
Figures may not add up due to rounding


• The Technical Review Panel (TRP) reviews and evaluates eligible
  proposals submitted to the Fund. It currently consists of 22 independent
  experts: 7 members with cross-cutting expertise in development,
  including health systems development, economics, public policy, and
  finance; 7 members with expertise in HIV/AIDS; 4 members with
  expertise in malaria; and 4 members with expertise in TB.6 There are
  two U.S. members on the TRP, an expert on TB and an expert with
  cross-cutting expertise in health and development issues. The TRP is
  supported by a WHO/UNAIDS7 working group that reviews the accuracy
  of baseline data on disease prevalence, poverty, and other indicators
  provided in the proposals. The working group also reviews the accuracy
  and relevance of the information provided by applicants on their ability


6
 TRP members generally agree to serve for 2 years; members rotate at different times to
ensure continuity.
7
UNAIDS consists of eight cosponsors: U.N. Children’s Fund, U.N. Development Program,
U.N. Population Fund, U.N. International Drug Control Program, International Labor
Organization, U.N. Educational, Scientific, and Cultural Organization, WHO, and the World
Bank.




Page 12                                                          GAO-03-601 Global Health
   to effectively use additional funds. The TRP makes recommendations to
   the board for final decisions on proposal selection. According to
   officials at the Department of Health and Human Services, health and
   development experts at the Centers for Disease Control and Prevention
   and USAID conducted an informal review of approved proposals and
   largely concurred with the TRP’s recommendations.

• As the Fund’s trustee, the World Bank receives money from donors,
  holds the money in an interest-bearing account, and disburses it
  according to the Fund’s written instructions.

At the country level, governance and oversight structures include a
Country Coordinating Mechanism, a principal recipient, subrecipients, and
a Local Fund Agent.8

• The country coordinating mechanism (CCM) is meant to provide a
  forum for stakeholders to work together to identify needs and develop
  and submit proposals to the Fund and follow the progress of grant
  projects during implementation. According to the Fund, CCM
  membership should include high-level government representatives as
  well as representatives of NGOs, civil society, multilateral and bilateral
  agencies, and the private sector. Further, all eligible partners in the CCM
  should be entitled to receive Fund money based on their stated role in
  implementing the proposal.




8
 An additional component of the governance structure, the Partnership Forum, will be made
up of stakeholders concerned about the prevention, care, treatment and eventual
eradication of HIV/AIDS, tuberculosis and malaria. It will meet every 2 years to provide
views on the Fund's policies and strategies.




Page 13                                                        GAO-03-601 Global Health
• The principal recipient, which is a member of the CCM, is responsible
  for receiving and implementing the grant. A principal recipient can be a
  government agency, an NGO, a private organization, or, if alternatives
  are not available, a multilateral development organization. Of the 69
  grant agreements resulting from the first round of proposals approved
  by the Fund, 41 (59 percent) are with principal recipients that are
  government agencies, 17 (25 percent) are with NGOs, and 9 (13 percent)
  are with the U.N. Development Program.9 (See app. II for more detailed
  information.) The principal recipient is responsible for making sure that
  funds are properly accounted for as well as for monitoring and
  evaluating the grant’s effectiveness in accordance with indicators
  mutually agreed to by the Fund and the grantee. In some cases, there
  may be multiple principal recipients for a single grant. The principal
  recipient typically works with other entities, or subrecipients, to carry
  out grant activities.

• Subrecipients are entities, such as NGOs, with the expertise necessary
  to perform the work and can be other CCM members. The principal
  recipient is responsible for supervising any subrecipients and
  distributing Fund money to them.

• The local fund agent (LFA) is the Fund’s representative in each
  recipient country and is responsible for financial and program oversight
  of grant recipients. This oversight role includes an assessment of
  recipients prior to their receiving money from the Fund. The assessment
  covers recipients’ ability to maintain adequate financial controls,
  procure goods and services, and carry out program activities. The Fund
  selects one LFA in each country. As of April 1, 2003, the Fund has
  contracted with four organizations to fill this role: two private sector
  firms, KPMG and PricewaterhouseCoopers; one private foundation that
  was formerly a public corporation, Crown Agents; and one multilateral
  entity, the U.N. Office for Project Services (UNOPS).10 The Fund may
  contract with additional organizations as the need arises and expects to
  receive bids from potential LFAs by August 2003.




9
 In addition, one grant agreement is with a private sector entity and the principal recipient
for another has yet to be determined.
10
 According to World Bank and Fund officials, the Bank is serving as the local fund agent for
a TB project in India due to unique circumstances pertaining to this project.




Page 14                                                            GAO-03-601 Global Health
Challenges at Country Level
Slow Disbursement of
Grants; Fund Taking Steps
to Respond

Limited Communication, Lack of      As of late 2002, in three of the four countries we visited, country
Clarity over Roles and              coordinating mechanisms were not operating at levels envisioned by the
Responsibilities at Country Level   Fund, owing in part to insufficient communication between the Fund and
                                    the CCM as well as between the CCM’s chair and members. This has
                                    resulted in confusion over the intended structure and purpose of the CCM.
                                    While our sample of only four countries is not necessarily representative of
                                    all grant recipients, several NGOs reported similar observations to the
                                    board. The Fund has posted general guidelines for CCMs on its Web site as
                                    well as in its calls for proposals. These guidelines encourage CCMs to hold
                                    regular meetings; engage all relevant participants, including
                                    representatives of civil society, in substantive discussions; ensure that
                                    information is disseminated to all interested parties; and be involved in the
                                    implementation of projects after proposals are developed and submitted to
                                    the Fund. However, many CCMs had difficulties following these guidelines.

                                    The role of the CCM in developing proposals and participating in their
                                    implementation after approval is not clear, according to a report by an
                                    international HIV/AIDS organization that assessed the participation of
                                    NGOs in the CCM process11 and according to CCM members in several
                                    countries. For example, many NGOs are not aware that they can participate
                                    in both the development and implementation of proposals. Furthermore,
                                    they are demanding clearer information on the selection of CCM members
                                    and the entities to which CCMs are accountable. An NGO participant told
                                    us that after a meeting in March 2002, the CCM did not convene again for
                                    about 6 months because it had received no guidance from the Fund on how
                                    to proceed. A number of members of another CCM said that they did not
                                    get a chance to vet or, in some cases, read proposals before endorsing
                                    them. In addition, after the proposals were submitted, members of this
                                    CCM were not informed of important events in a timely manner. A donor
                                    participating in this CCM stated that, with regard to a grant proposal for


                                    11
                                     NGO Participation in the Global Fund, a Review Paper, International HIV/AIDS Alliance,
                                    October 2002.




                                    Page 15                                                       GAO-03-601 Global Health
more than $200 million that was submitted in the second round and has
since been approved, no one knows who will be responsible for
implementing it when the money arrives.

A number of the CCM members with whom we met were concerned over
the level of involvement of all relevant parties. According to information
compiled by the Fund’s Governance and Partnership Committee for the
board’s January 2003 meeting, all CCMs that submitted second-round
proposals12 are chaired by a government official (79 percent from the
health ministry). In addition, at least a quarter of the CCMs lack
representation from one or more of the following groups: people living
with one of the three diseases, the private sector, academic institutions, or
religious organizations. In one country, for example, donors said that NGOs
need to develop a stronger and more active voice on the CCM. An update
on the Fund for nongovernmental organizations and civil society, prepared
by the International Council of AIDS Service Organizations,13 expressed
similar views regarding CCMs in countries that we did not visit. However,
the update also included evidence that CCMs are enhancing the
involvement of NGOs in national health policies in some countries. In
addition to members of civil society, key government ministries and donors
are often not included as members in current CCMs. The Governance and
Partnership Committee recognized this point in the document prepared for
the January 2003 board meeting, stating, “Of concern is the relatively low
participation from Ministries of Finance (37 percent), given the need to
ensure consistency with Global Fund grant processes and overall fiscal and
monetary policies of recipient countries.” The committee also noted that
although the World Bank is a significant source of resources for many
recipients, it is a member of only 14 percent of CCMs. In one country we
visited, for example, where neither the Ministry of Finance nor the World
Bank were members of the CCM, a dispute over where the Fund money
should be deposited delayed the signing of the country’s first grant
agreement.




12
 The Fund notes that the information provided by CCMs during the first proposal round
was not detailed enough to extract this data and that most CCMs from round one
resubmitted proposals in the second round. Two CCMs from areas experiencing long-
running conflict were excluded from this analysis.
13
     Global Fund Update for NGOs and Civil Society, June 2002.




Page 16                                                          GAO-03-601 Global Health
                              Dissemination of information is also a problem, according to the
                              international HIV/AIDS organization report and CCM members with whom
                              we met. The report stated that many NGOs are not receiving essential
                              information from the Fund because the CCM chairs receiving this
                              information are not passing it on to all stakeholders. In one country, several
                              CCM members told us that the CCM is not functioning well because the
                              flow of information is tightly controlled by the chair. Many members of this
                              CCM, for example, were unaware that a nongovernmental organization had
                              also submitted a proposal to the Fund.14 As of April 1, 2003, more than 1
                              year after the proposal was submitted, the CCM had yet to review and
                              endorse or reject it, as required by the Fund. As a result, the Fund has
                              dropped this proposal from its list of those approved in the first round.

                              Of the four countries we visited, even the country with the most functional
                              CCM experienced some difficulties. This country had received substantial
                              support from a Fund staff member, who spent 6 weeks in the country
                              helping the CCM clarify the Fund’s principles regarding CCMs and how its
                              proposal will be implemented. This support, together with the active
                              leadership of the CCM chair, was widely credited with the relative success
                              of the CCM. Members of this CCM said it had become a transparent,
                              multisectoral, participatory, and consensus-driven forum that has held
                              frequent meetings. However, CCM members were still unclear as to their
                              role after the grant is disbursed.

The Fund Is Taking Steps to   According to the Fund, it does not have sufficient resources to provide the
Address Problems Associated   same level of support for every country as it did in the country cited above.
with CCMs                     Nevertheless, it is currently attempting to enhance communication with
                              and within country coordinating mechanisms in order to improve their
                              functioning. While trying to remain flexible and attentive to differing
                              situations in each country and avoid an overly prescriptive, “cookie- cutter”
                              approach, the Fund’s Governance and Partnership Committee proposed to
                              the board in January 2003 specific guidelines for CCMs that address many




                              14
                               The Fund has approved a few proposals from NGOs that were submitted outside the CCM
                              process. According to Fund guidance, NGOs are currently allowed to apply outside the CCM
                              process in exceptional circumstances, for example, in countries or regions where conflict
                              has incapacitated local government and other structures or where no CCM existed.




                              Page 17                                                        GAO-03-601 Global Health
of the issues raised above.15 The committee also proposed that the
secretariat work with it to develop a handbook for CCMs that contains
these principles. Although the board did not reach a decision on this
proposal in January 2003, as of April 1, 2003, the agreements between the
Fund and grant recipients contained language describing the nature and
duties of CCMs. This language states that CCMs are to have a role in
monitoring the implementation of Fund grants; that they should promote
“participation of multiple constituencies, including Host Country
governmental entities, donors, nongovernmental organizations, faith-based
organizations and the private sector”; and that they should meet regularly
to develop plans and share information. According to U.S. government
officials who were involved in setting up the Fund and who attended the
January 2003 board meeting, the Fund may also consider other options to
enhance the functioning of CCMs, such as having those CCMs that have
been working relatively well share best practices with others or having a
member of the secretariat hold regional workshops for CCMs from several
countries. Starting in December 2002 through the spring of 2003, the Fund
held a series of regional workshops for CCM members and other
stakeholders in the Philippines, Myanmar, Senegal, and Cuba.16 Additional
workshops are scheduled to take place in South Africa, Ukraine, and Latin
America. According to the Fund, these workshops are providing a forum
for “open dialogue,” whereby the Fund can disseminate and clarify
information and receive feedback. In addition, the Fund is considering
expanding the secretariat to allow its staff to devote more time to advising
individual CCMs and to working with local partners, such as bilateral and
multilateral donors, that are assisting with grant implementation.



15
  These guidelines include, among others, making sure that certain sectors and institutions
are represented on the CCM, including the ministry of finance, multilateral development
banks, religious organizations, academic entities, and the private sector. In addition, no
more than half the CCM’s membership should consist of members of public sector
institutions (e.g., host country government officials and officials from bilateral or
multilateral agencies). The guidelines also specify that the chair and other key posts should
alternate between public sector officials and representatives of civil society or the private
sector; that participating entities should choose their own representatives; that
correspondence between the Fund and the CCM should be copied to all members; and that
fiduciary arrangements as grants are implemented should include the monitoring of CCM
performance as one of the indicators of proposal sustainability.
16
 The Cuba meeting was convened at a larger forum on HIV/AIDS and sexually transmitted
diseases in Latin America and the Caribbean.




Page 18                                                           GAO-03-601 Global Health
Administrative Arrangement   The Fund established an administrative services agreement with the WHO,
with WHO Causing Delays;     an agency of the United Nations, to benefit from some of the tax and
                             employment advantages of an international organization,17 but this
Fund Considering Alternate   relationship is causing delays and other problems, and the Fund is
Arrangements                 considering alternate arrangements.18 The agreement with WHO requires
                             that the Fund apply certain WHO regulations and systems governing
                             personnel and contractual issues. According to WHO and Fund staff, while
                             this agreement gives the staff of the secretariat important privileges in
                             Switzerland and allowed the Fund to begin operating quickly, it has
                             contributed to administrative delays, frustration, and uncertainties
                             concerning responsibility and accountability.

                             Regarding delays, once the Fund makes certain administrative decisions, it
                             must wait until it obtains clearance from officials at WHO before it can act.
                             According to secretariat officials and one of the local fund agents we met
                             with, this dual approval process has delayed the approval of LFA contracts
                             by up to 8 weeks. The officials stated that this is significant because it has
                             lengthened the time required to get grant agreements completed and signed
                             by recipient countries. The WHO official responsible for approving the
                             Fund’s administrative decisions said that it takes several weeks to vet key
                             actions, such as the LFA contracts, when they are added to his unit’s
                             existing workload.

                             In addition to creating delays, the relationship between the Fund and WHO
                             has led to frustration and uncertainties for Fund staff concerning the scope
                             of their responsibility and the authorities to whom they are accountable.
                             For example, although the board granted the executive director of the
                             Fund the authority to sign contracts with vendors and grantees, WHO must
                             be a party to all contracts since the executive director is technically a WHO
                             employee. According to officials from both the Fund and WHO, removing
                             the dual approval process would lessen delays and uncertainties over roles
                             and responsibilities.




                             17
                              The Fund, established as a foundation under Swiss law, is a private entity in Switzerland.
                             As such, it lacks the privileges and immunities granted to international organizations.
                             18
                              This administrative services agreement also enabled the Fund to begin operating without
                             having to create its own administrative and management structure. Members of the board
                             recognized the expediency of this solution and its risks, and directed the Fund to explore
                             alternatives.




                             Page 19                                                           GAO-03-601 Global Health
                        The board asked the secretariat to look into pursuing enhanced legal
                        benefits for the Fund from Swiss authorities.19 An important objective for
                        this change is to allow the Fund to withdraw from the administrative
                        services agreement with the WHO while retaining tax and other
                        advantages. However, according to the Fund, there are important
                        considerations to be resolved before the board would approve and the
                        Swiss government would authorize a change in recognition. The board
                        expects to address this issue at its next meeting in June 2003.



The Fund Developed      The Fund has developed systems for financial accountability and for
                        monitoring and evaluating grant activities and has issued guidance on
Comprehensive           procurement. However, in the Fund’s first year of operation, these systems
Oversight Systems and   faced challenges at the country level that the Fund is working to address,
                        and procurement guidance is still evolving.
Issued Procurement
Guidance, but Systems
Face Challenges, and
Guidance Is Still
Evolving

Oversight Systems       The Fund, through the local fund agent, has established a comprehensive
Established but Face    system for overseeing grant recipients, but the introduction of the LFA has
                        been marked by controversy and misconceptions regarding its role. These
Challenges
                        problems may impede the implementation of grants. The Fund recognizes
                        these issues and is developing additional guidance for LFAs and principal
                        recipients.




                        19
                           The Fund has discussed with the Swiss government the possibility of receiving the benefits
                        of quasi-intergovernmental status, such as certain tax benefits, and is also discussing the
                        possibility of gaining a more enhanced package of privileges and immunities comparable to
                        those given to international organizations. Private organizations that have received such
                        privileges and immunities from the Swiss government include the International Federation
                        of Red Cross and Red Crescent Societies.




                        Page 20                                                           GAO-03-601 Global Health
The Fund Has Established a       The Fund has established a system for ensuring that principal recipients
Comprehensive System for         rigorously account for the money they spend. This system requires them to
Ensuring Recipients’ Financial   demonstrate adequate finance and management systems for disbursing
Accountability                   money, maintaining internal controls, recording information, managing and
                                 organizing personnel, and undergoing periodic audits. The secretariat, the
                                 LFA, and the principal recipient each has a role in this system. The
                                 secretariat selects the LFAs, exercises quality control over their work, and
                                 draws up grant agreements. Prior to selecting LFAs, the secretariat
                                 considers their independence from principal recipients and other CCM
                                 members in an effort to avoid potential conflicts of interest. It also
                                 considers their expertise in overseeing financial management, disease
                                 mitigation programs, and procurement, as well as their experience with
                                 similar assignments. The LFAs, in turn, assess principal recipients for the
                                 same capabilities. To ensure that the disbursement of funds will be
                                 carefully controlled, the secretariat provides principal recipients with
                                 limited amounts of money at a time, based on their documentation of
                                 project results. In an effort to ensure clear definition of roles,
                                 responsibilities and accountability, it developed guidelines for LFAs that
                                 define their duties to assess and oversee principal recipients. For example,
                                 the LFA’s financial assessment of the principal recipient is to be completed
                                 before the grant agreement is signed, and the secretariat is to receive and
                                 validate a preliminary assessment before the LFA proceeds with the full
                                 assessment. To minimize inefficiency, the preliminary assessment is to
                                 draw on existing records of the principal recipient’s performance with
                                 other donors.

                                 The Fund has established requirements for principal recipients in the grant
                                 agreement. Specifically, the agreement requires principal recipients to
                                 maintain records of all costs they incur, and these records must be in
                                 accordance with generally accepted accounting standards in their country
                                 or as agreed to by the Fund. Principal recipients are to have an independent
                                 auditor separate from the LFA and acceptable to the Fund that conducts
                                 annual financial audits of project expenditures. The principal recipient is
                                 also to ensure that the expenditures of subrecipients are audited. The LFA
                                 or another entity approved by the Fund is authorized to make site visits “at
                                 all reasonable times” to inspect the principal recipient’s records, grant
                                 activities, and utilization of goods and services financed by the grant. The
                                 principal recipient is required to submit quarterly and annual reports to the
                                 Fund through the LFA on its financial activity and progress in achieving
                                 project results. For example, the annual financial reports are to include the
                                 cost per unit of public health products procured and the portion of funds
                                 supporting various activities such as prevention, treatment, care,



                                 Page 21                                                GAO-03-601 Global Health
                                 administering the project, and enhancing local skills and infrastructure
                                 through training and other activities. The reports are also to specify the
                                 portion of funds used by local NGOs, international NGOs, government
                                 agencies and other public sector organizations (e.g., U.N. agencies), the
                                 private sector, and educational institutions. Failure to abide by these and
                                 other requirements in the grant agreement can result in the Fund
                                 terminating the grant or requiring the principal recipient to refund selected
                                 disbursements.

The Fund Has Established a       The Fund has established a detailed system for monitoring, evaluating, and
Detailed System for Monitoring   reporting at regular intervals on the performance of grants that identifies
and Evaluating Grant             specific roles for the LFA, principal recipient, subrecipients, and CCM.
Performance                      Prior to the signing of each grant agreement between the Fund and the
                                 principal recipient, the LFA conducts an assessment of the principal
                                 recipient that includes an evaluation of its capacity to monitor and evaluate
                                 grant projects. Within 90 days after the agreement enters into force, the
                                 principal recipient is required to submit a detailed plan for monitoring and
                                 evaluation. The principal recipient and the subrecipients are responsible
                                 for selecting the appropriate indicators, establishing baselines, gathering
                                 data, measuring progress, and preparing quarterly and annual reports. The
                                 LFA is charged with making sure that the principal recipient monitors and
                                 evaluates its projects and with reviewing the reports. If the LFA identifies
                                 concerns, it is to discuss them with the principal recipient and the CCM and
                                 may forward information to the Secretariat in Geneva. According to the
                                 Fund, the CCM should work closely with the principal recipient in
                                 establishing the monitoring and evaluation processes and should review
                                 the reports along with the LFA.

                                 Building on the existing body of knowledge and contributions of evaluation
                                 specialists from organizations such as the U.S. Agency for International
                                 Development (USAID), UNAIDS, WHO, and the Centers for Disease
                                 Control and Prevention, the Fund has identified indicators for recipients to
                                 use in tracking the progress of grant-supported projects. The indicators
                                 that the principal recipient will use to track the progress of individual
                                 grants are expected to measure processes, outcomes, and impact. During
                                 the first 2 years of 5-year projects, the quarterly and annual reports
                                 submitted by the principal recipient to the LFA track steps taken in the
                                 project implementation process. For example, a process indicator for
                                 HIV/AIDS prevention activities could measure the dissemination of
                                 information, such as the number of prevention brochures developed and
                                 distributed to teenagers or other at-risk groups. Starting in the third year,
                                 the principal recipient is expected to report on program outcomes.



                                 Page 22                                                GAO-03-601 Global Health
Following the HIV/AIDS prevention example, this would entail measuring
whether the information had any effect on the behavior of the targeted
population. In this example, the principal recipient would report on the
percentage of the young people or others receiving the brochures who
correctly identified ways of preventing HIV transmission and stated that
they had changed their behavior accordingly. Near the end of the project,
the principal recipient would report on its epidemiological impact by
measuring whether there has been a reduction in the incidence of disease
in the target group.

Funds will be released to the principal recipient at intervals based on its
performance according to these indicators. The exact amounts to be
released will be calculated using its anticipated expenditures. In cases
where repeated reports demonstrate that progress is not being made, the
Fund, after consultation with the LFA and CCM, may choose to make
adjustments, including replacing the principal recipient or nonperforming
subrecipients. The key evaluation for the majority of the grants20 comes
after 2 years, when the Fund expects to begin seeing evidence that grant-
supported activities are leading to desired outcomes. At that point, the
Fund will decide whether to continue to disburse money to grant
recipients.

The board has agreed in principle that there should also be an independent
evaluation of the Fund’s overall progress in meeting its key objective of
reducing the impact of HIV/AIDS, TB, and malaria by mobilizing and
leveraging additional resources. According to the Fund, this evaluation will
include an assessment of the performance of the board and the secretariat.
The focus of the evaluation will be on the board’s and secretariat’s
performance in governing and implementing processes that enable Fund
grants to relieve the burden of disease, improve public heath, and
contribute to the achievement of the U.N.’s millennium goals.21 As of April
1, 2003, the board had not made a final decision on what entity will conduct
the independent evaluation or how or when the evaluation will be
conducted. In addition, the board had not yet determined what portion of
its resources should be budgeted for this evaluation.



20
     Most grants last for 5 years.
21
 In September 2000, world leaders at the U.N. Millennium Summit agreed to a set of time-
bound, measurable goals for combating poverty, hunger, disease, illiteracy, environmental
degradation, and discrimination against women.




Page 23                                                          GAO-03-601 Global Health
LFAs Face Several Challenges   In certain countries, the introduction of the local fund agent has been
                               marked by controversy and misconceptions, partly due to its newness, that
                               may delay the designation of LFAs and make it difficult for them to oversee
                               the implementation of grants. For example, the chair of the CCM in one of
                               the countries we visited, where the principal recipient is the Ministry of
                               Health, believed that another government ministry could serve as the LFA,
                               despite the Fund’s explicit instructions that the LFA must be independent
                               from the grant recipient. In another country, key government and some
                               donor officials were upset over the Fund’s decision to bypass existing
                               systems for handling donor funds. This situation contributed to resentment
                               of the LFA as the Fund’s local representative and oversight mechanism.22 A
                               number of stakeholders with whom we met assumed incorrectly that the
                               LFA was charging an exorbitant fee and deducting it from the grant. In fact,
                               LFA fees are funded through the secretariat, not deducted from each grant.
                               Payment for LFA services constitutes the single largest item in the
                               secretariat’s budget, accounting for $16.4 million, or 42 percent of its
                               proposed 2003 budget. Overall, however, these fees represent only about 2
                               percent of estimated grant disbursements for the year, according to
                               secretariat officials.23 Moreover, representatives from KPMG, one of the
                               entities designated by the Fund as an LFA, told us that they are charging the
                               Fund 50 percent less than they are charging other clients for similar
                               services.

                               The Fund is aware of these problems and is attempting to address them.
                               According to a January 2003 report of the board’s Monitoring, Evaluation,
                               Finance and Audit Committee, the oversight role of the LFA can create
                               resentment in a country if it is carried out without local participation in
                               problem analysis and resolution. The report cites the same example we
                               observed, stating that recent experience in that country showed that
                               existing local systems should be used as much as possible to avoid new and
                               unnecessary requirements that distract from, rather than support, the
                               Fund’s goal of helping countries improve their capacity to fight disease. On
                               January 12, 2003, the Fund drew up guidelines on financial management



                               22
                                Representatives from one LFA, however, stated that it was their understanding that the
                               principal recipient, along with the CCM, chooses the LFA in each country. According to
                               Fund documents, the Fund makes this decision, taking into consideration input from the
                               CCM.
                               23
                                These officials said that they expect to disburse about $750 million in 2003 but cautioned
                               that this figure is not certain.




                               Page 24                                                           GAO-03-601 Global Health
                              arrangements for principal recipients that offer several options, including
                              the use of credible, existing local systems.

                              Finally, despite the Fund’s having designated independence as a key factor
                              in the selection of LFAs, the limited number of trained personnel and
                              organizations in many recipient countries may impair independence,
                              resulting in potential conflicts of interest. Given the small pool of qualified
                              disease experts available for hire in some poor countries, subrecipients
                              recruited to implement grant activities will be competing with
                              subcontractors to the LFA for monitoring these disease-mitigation projects.
                              It is unclear whether there is sufficient expertise available to provide staff
                              for both of these functions. For example, in one of the countries we visited,
                              the NGO the LFA had hired to assess the the principal recipient’s capacity
                              to carry out its grant activities will also be implementing a Fund project for
                              this principal recipient. Since effective evaluation assumes that the monitor
                              is independent of the implementer, achieving such independence may be a
                              challenge in such circumstances. Conceivably, there also may be situations
                              in which one U.N. organization, the U.N. Office for Project Services—one
                              of the entities contracted by the Fund to serve as an LFA—may be
                              overseeing another, the U.N. Development Program, serving as the
                              principal recipient. Fund officials have stated that they would try to avoid
                              this situation. The board’s Monitoring, Evaluation, Finance and Audit
                              Committee is developing a conflict of interest policy for LFAs. In the
                              meantime, the Fund has required one LFA with a potential conflict of
                              interest to include in its contract conflict of interest mitigation policies and
                              procedures to minimize this possibility. The Fund has included conflict-of-
                              interest and anticorruption provisions for principal recipients in the grant
                              agreement document.



Board Developed               The Fund, through the grant agreements, has developed detailed
Procurement Requirements,     procurement requirements for medical supplies and a brief list of
                              requirements for procuring nonmedical items, but certain issues have not
but Certain Issues Have Not
                              been finalized. Establishing procurement requirements is important to
Been Finalized                ensure that grant recipients use Fund money efficiently as they purchase
                              medicines, vehicles, office equipment, and other items; contract services;
                              and hire personnel.




                              Page 25                                                  GAO-03-601 Global Health
Board Analyzed Issues and         The Fund’s procurement provisions have focused primarily on drugs and
Developed Options for Procuring   health products24 because a significant amount of Fund money will be
Drugs and Health-Related Items    spent on these items and because drug procurement is complex. For
                                  example, the Fund anticipates that $194 million of grant money will be
                                  spent on drugs in the first 2 years of second-round grants, based on the
                                  proposals approved in that round. 25 When other health products are
                                  included, the total comes to $267 million, or almost half of anticipated
                                  expenditures, for the first 2 years of round-1 grants, and $415 million,
                                  representing a similar percentage of anticipated expenditures, for the first
                                  2 years of round-2 grants (see fig. 5). Drugs and health products for round-2
                                  grants are expected to grow to $1.17 billion over the full life of these
                                  grants.26




                                  24
                                    The term “health products,” as defined by the Fund in the grant agreement, includes
                                  pharmaceutical products; diagnostic technologies and supplies (e.g., HIV test kits); bed nets;
                                  insecticides; aerial sprays against mosquitoes; other products for prevention (e.g.,
                                  condoms); and laboratory equipment and supportive products (e.g., microscopes and
                                  reagents).
                                  25
                                       Data on anticipated expenditures for drugs are not available for first-round proposals.
                                  26
                                   The Fund has not provided a breakdown of anticipated expenditures for the full life of
                                  grants approved in the first round.




                                  Page 26                                                               GAO-03-601 Global Health
Figure 5: Anticipated Grant Expenditures for Drugs and Health Products

 Round 1 (April 2002)a                                               Round 2 (January 2003)a




                                      44% •       Drugs and                                           47% •              Drugs and
         56%                                      health productsb        53%
                                                                            •                                            health productsb
           •                                      $267 million                                                           $415 million




                                                  Otherc                                                                 Otherc
                                                  $340 million                                                           $468 million
 Source: GAO analysis of Fund data.

                                              a
                                               The totals for each round are board-approved ceilings for approved proposals; actual grant totals may
                                              be less.
                                              b
                                               Drugs and health products include educational materials and possibly other items, based on
                                              information provided in the proposals for this category.
                                              c
                                                Other includes expenses associated with infrastructure and equipment (e.g., vehicles), training,
                                              human resources, information systems, administrative costs, and monitoring and evaluation.


                                              Drug procurement is complex, as it requires strict standards for ensuring
                                              and monitoring quality, controlling transport and storage, and tracking how
                                              the products are used. For example, many grant recipients have plans to
                                              purchase antiretrovirals, which block the replication of HIV and are
                                              indispensable for treating patients living with the disease. These drugs have
                                              strict dosing regimens, and patients must be closely monitored to ensure
                                              that they are adhering to these regimens and do not develop adverse
                                              reactions or resistant strains of the virus. The Fund estimates that close to
                                              200,000 people will be treated with antiretrovirals during the first 2 years of
                                              grants resulting from the first 2 proposal rounds and that close to 500,000




                                              Page 27                                                                   GAO-03-601 Global Health
will be treated over the life of these grants.27 (See app. III for more detailed
information.)

In April 2002, the board established a procurement and supply management
task force, made up of technical experts from U.N. agencies, the private
sector, and civil society, to analyze issues related to procuring drugs and
health products and develop options and recommendations for grant
recipients on how to procure them. In October 2002, the task force
provided a list of issues to the board that included

• drug selection and the use of preventive, diagnostic, and related health
  products;

• monitoring drug quality and compliance with country drug registration
  processes for marketing and distribution;

• procurement principles and responsibilities, including supplier
  performance, obtaining the lowest price for quality goods, compliance
  with national laws and international obligations, and domestic
  production;

• managing and assessing the chain of supply, including forecasting
  demand, ensuring proper shipping and storage, and preventing drug
  diversion;

• payment issues, including direct payment and exemption from duties,
  tariffs and taxes; and

• ensuring that patients adhere to treatment while monitoring drug
  resistance and adverse drug reactions.

In the grant agreements, the Fund provides specific requirements for
principal recipients regarding many of these issues. The requirements are
meant to ensure the continuous availability of safe and effective drugs and
other health products at the lowest possible prices and to provide a
standard for the LFA to use in evaluating the procurement activities of the
principal recipient. For example, the requirements state that recipients


27
 The Fund cautions that the actual number of patients treated may vary depending on
prices, recipients’ ability to procure and deliver the drugs, and other factors related to the
implementation of the grants.




Page 28                                                             GAO-03-601 Global Health
                             must comply with established quality standards when purchasing
                             medicines. The requirements also stipulate that no Fund money may be
                             used for procuring drugs or other health products until the Fund, through
                             the LFA, has verified that the principal recipient has the capacity to manage
                             (or oversee subrecipients’ management of) procurement tasks, such as
                             purchasing, storing, and distributing these products in accordance with
                             Fund guidance, unless the Fund agrees otherwise. In one country, the Fund
                             issued additional procurement requirements to complement the grant
                             agreement, based on an assessment of the principal recipient’s ability to
                             procure drugs and other goods. The Fund anticipates that all grant
                             recipients that have plans to purchase medicines with Fund money will be
                             assessed within 6 months after signing the grant agreement.

The Fund Provided General    In addition to providing specific requirements for procuring drugs and
Requirements for Procuring   other health-related products, the grant agreement includes a brief list of
Goods and Services           general requirements that also apply to services and nonmedical items such
                             as vehicles or office equipment. These requirements establish a series of
                             minimum standards that recipients must observe when purchasing goods
                             or executing contracts. For example, recipients are to award contracts on a
                             competitive basis to the extent possible and must clearly describe the
                             goods they are requesting when they ask for bids. They must pay no more
                             than a reasonable price for goods and services, keep records of all
                             transactions, and contract only with responsible suppliers who can
                             successfully deliver the goods and services and otherwise fulfill the
                             contract.

                             The Fund encourages recipients to use international and regional
                             procurement mechanisms if doing so results in lower prices for quality
                             products. For example, in one country, the U.N. Development Program will
                             purchase vehicles for subrecipients because it has extensive experience
                             with the import process. Similarly, the health ministry of another country—
                             the entity that will implement the grant—may purchase antiretrovirals
                             through the Pan American Health Organization. The Fund also encourages
                             recipients with procurement experience to use their existing procedures,
                             provided these procedures meet the requirements set forth in the grant
                             agreement. For example, a principal recipient in one country will use its
                             own procedures to purchase nonmedical items because these procedures
                             are familiar and are based on generally accepted management practices.




                             Page 29                                                GAO-03-601 Global Health
The Fund Has Not Finalized   The Fund has not finalized certain procurement issues, including (1) the
Some Procurement Issues      consequences of noncompliance with national laws regarding patent rights
                             and other intellectual property obligations, (2) the acceptance of waivers
                             that would permit recipients to pay higher prices for domestically
                             produced goods, and (3) solicitation and acceptance of in-kind donations.
                             The board amended its policy on a fourth issue, payment of taxes and
                             duties on products purchased with Fund money, and has asked the
                             secretariat to monitor the impact of this change.

                             Board documents and the Fund’s guidelines for submitting proposals
                             encourage grant recipients to comply with national laws and applicable
                             international obligations, including those pertaining to patents and other
                             intellectual property rights. This issue is significant because these laws and
                             obligations have rules and procedures that affect the procurement of
                             drugs.28 The board has yet to reach a decision regarding the consequences
                             of noncompliance, that is, whether failure to comply would automatically
                             be considered a breach of the grant agreement and cause for termination of
                             the grant. As of April 1, 2003, the Fund has not included any language
                             concerning compliance with national laws and international obligations in
                             the grant agreement. In the interim, however, Fund officials stated that the
                             Fund retains the option of using the more general termination clause in the
                             grant agreement in the event that a recipient is found by the appropriate
                             authorities to be in violation of national law or international obligations.

                             Another issue on which no formal decision has been made is whether the
                             Fund, like the World Bank, should allow aid recipients to pay higher prices
                             for domestically produced medicines and other goods to develop local
                             manufacturing capacity. Documents prepared for the fourth board meeting
                             note that the benefits of paying higher prices for domestically produced
                             items are not clear and that it could be difficult for recipients to administer
                             such a pricing scheme. The documents also note that it may be beyond the
                             mandate of the Fund to support domestic efforts by approving higher


                             28
                               As of April 1, 2003, the World Trade Organization has not been able to resolve a dispute
                             concerning a clarification of its Trade Related Intellectual Property Agreement that would
                             allow the importation of generic drugs under patent by developing countries that do not
                             have the capacity to manufacture them domestically. The dispute concerns which drugs,
                             diseases, and countries will be covered. The United States has pushed for limited coverage,
                             whereas other countries favor broader coverage. The World Trade Organization was
                             established in 1995 to administer rules for international trade and provide a forum for
                             resolving trade disputes and conducting trade negotiations. Based in Geneva, Switzerland, it
                             is composed of 145 member states.




                             Page 30                                                           GAO-03-601 Global Health
prices for them. This was the only issue that board members brought to a
vote, at the January 2003 meeting, and were unable to obtain the votes
necessary to reach a decision. According to the Fund, the fact that no
decision was reached means that the status quo—that recipients are
encouraged to pay the lowest possible price for products of assured
quality—remains. This policy is also likely to remain for the foreseeable
future, since, according to Fund officials, it is no longer on the agenda of
the Portfolio Management and Procurement Committee or the
Procurement and Supply Management Advisory Panel, the two bodies that
report to the board on issues pertaining to procurement.

The board deferred to its June 2003 meeting the question of whether the
Fund should solicit or accept in-kind donations such as drugs on behalf of
grant recipients. The Portfolio Management and Procurement Committee
cautioned that the Fund needs to consider methods for ensuring the quality
of these products.

While the Fund states in the grant agreements that Fund resources shall not
be used to pay taxes and duties on products purchased in the recipient
country, the Portfolio Management and Procurement Committee revisited
this issue in its report to the January 2003 board meeting.29 Specifically, the
committee noted that this policy may be difficult for NGO recipients to
follow, as they have neither the authority to guarantee exemption nor the
cash reserves to cover costs when exemptions are not possible. The
committee implied that given these weaknesses, NGOs may be reluctant to
serve as principal recipients and indicated in its report that making sure
NGOs are included as principal recipients is more important than trying to
ensure that grant recipients don’t pay taxes and duties. The committee also
raised a practical issue, noting that the Fund’s current reporting
requirements do not provide it with the information necessary to determine
whether grantees are in fact using Fund money to pay these levies. At the
January 2003 board meeting, the Fund amended its policy on exempting
grant recipients from duties, tariffs, and taxes. The amended policy allows,
but does not encourage, Fund resources to be used to pay these costs. The
board asked the secretariat to monitor the impact of this revision and
report back when sufficient information is available.



29
  While USAID generally does not finance customs duties associated with procurement of
imported items, it will finance duties under certain circumstances. For example, it will
finance duties for NGOs that do not have tax exempt status.




Page 31                                                         GAO-03-601 Global Health
Lack of Resources           The Fund’s ability to approve and finance additional grants is threatened by
                            a lack of sufficient resources. The Fund does not currently have enough
Threatens Fund’s            pledges to allow it to approve more than a small number of additional
Ability to Continue to      proposals in 2003. In addition, without significant new pledges, the Fund
                            will be unable to support all of the already approved grants beyond their
Approve and Finance         initial 2-year agreements.
Grants

The Fund Requires           Because the Fund approves grant proposals on the basis of amounts that
Additional Pledges to       have been pledged, it will require additional pledges if it is to continue
                            approving grants. According to the Fund, it will approve proposals on the
Continue Approving Grants
                            basis of actual contributions to the trustee or pledges that will be converted
                            to contributions soon after approval, so that proposals can be financed in a
                            timely manner.30 As a result, the Fund has only a limited amount of money
                            available for its third proposal round, currently planned for late 2003. In
                            addition, the Fund will require significant additional pledges in order to
                            continue holding proposal rounds beyond the planned third round. The
                            Fund has less than $300 million available to support commitments in round
                            3, which would be significantly less than the $608 million in 2-year grants
                            approved in the first round31 and the $884 million approved in the second
                            round. These available resources are substantially less than the $1.6 billion
                            in eligible proposals that the Fund expects to be able to approve in round 3.
                            The Fund’s resource needs are based on expected increases in eligible
                            proposals over the next two rounds (rounds 3 and 4) due to a concerted
                            effort on the part of local partners to prepare significantly expanded
                            responses to AIDS, TB, and malaria (see fig. 6). Based on the number of
                            technically sound proposals it expects to receive and approve in future
                            rounds, and the amount pledged as of April 1, 2003, the Fund projects that
                            it will require $1.6 billion in new pledges in 2003 and $3.3 billion in 2004.




                            30
                             Pledges to the Fund may be multiyear, and thus some pledged money may not be
                            contributed to the trustee in the same year the pledge was made.
                            31
                             The Board originally granted up to $613 million over 2 years to 58 proposals. Three of these
                            proposals have since been dropped due to their inability to address a follow-up request by
                            the Fund. The maximum approved by the Board is thus $608 million for round 1.




                            Page 32                                                           GAO-03-601 Global Health
                           Figure 6: Anticipated Expansion in Approved Proposal Dollars through 2004 (actual
                           and estimated 2-year commitments)
                           Dollars in millions
                           2,000                                         1,900   1,900

                           1,800
                                                           1,600
                           1,600

                           1,400

                           1,200

                           1,000                 884

                                800
                                      608
                                600

                                400

                                200

                                 0

                                      Round 1a Round 2a Round 3b Round 4b Round 5b
                                                          2003     2004     2004
                                                        (October) (March) (October)

                           Source: Adapted by GAO from Fund documents.


                           Note: Round 3 has been announced and decisions will be made in October 2003. Dates for rounds 4
                           and 5 are tentative.
                           a
                           Actual data from receipt and approval of proposals (2-year grant commitments).
                           b
                           Global Fund estimate of expected 2-year grant commitments.




The Fund Requires          The Fund will require significantly greater contributions to finance
Significantly Greater      approved grants beyond initial 2-year commitments of money. By January
                           2003, the Fund had made 2-year grant commitments equaling nearly $1.5
Contributions to Finance
                           billion in the first two proposal rounds.32 Among other things, these grants
Approved Grants for        seek to provide 500,000 people with AIDS medications and 500,000 AIDS
Duration of Programs       orphans and other vulnerable children with care and support. Although the
                           Fund approves grants that can be covered by pledges received, these


                           32
                            The board approves grant proposals based on budgets submitted, but recipients are not
                           guaranteed this amount. The amount approved is a ceiling, and the Fund may slightly
                           decrease the grant amount on closer inspection of the recipient’s needs.




                           Page 33                                                               GAO-03-601 Global Health
pledges need only be sufficient to finance the initial 2-year period of the
grant. Since the typical Fund-supported project lasts five years, this could
result in the Fund’s inability to fulfill its longer-term obligation to programs
that are deemed successful at the 2-year evaluation. If all currently
approved proposals demonstrate acceptable performance after 2 years, the
Fund will require $2.2 billion more to assist these programs for an
additional 1 to 3 years. Currently, the Fund has $3.4 billion in total pledges
and nearly $3.7 billion in potential obligations from the first two proposal
rounds (see fig. 7). The Fund will only sign grant agreements based on
money received by the trustee, as opposed to pledges received. Thus,
continued support beyond the 2-year point requires that a significant
amount of pledges be turned into actual contributions. However, not all
pledges are contributed in a timely manner. For example, as of January 15,
2003, more than $90 million pledged through 2002 had still not been
contributed, including $25 million pledged by the United States. The Fund
is providing numerous grants that will be used to procure antiretroviral
drugs for people living with HIV/AIDS. Interruption or early termination of
funding for such projects due to insufficient resources could have serious
health implications, although Board documents suggest that special
consideration for people undergoing treatment may be given during the
evaluation process. The Fund currently has potential obligations lasting at
least until 2007, and each additional proposal round will incur further long-
term obligations for the Fund.




Page 34                                                  GAO-03-601 Global Health
Figure 7: Pledges Made, Amount Received, and Grant Proposals Approved
Dollars in millions
4,000
                                                     3,677
3,500                                                2,082

           3,374
3,000


2,500


2,000

                       1,780               1,492
1,500                                                1,595
                                            884

1,000
                                   935
    500                                     608

      0
                     20 gh



                    31 ed




                      ts b .



                      ts .
                    en -yr



                    en -yr
                    20 es
                      08 a




                                                             b
                  3/ eiv
                       03




                         3
                 of u
                 h dg




                       2



                       5
                      /0
              d h ro



             of ec
             ug le



           en t
          ro l p




          as nt r




               it m



               it m
         e es
        th ota



      th dg




            m



            m
           ou




          m



          m
           T



          e



         m
       Pl




       co



       co
       A




                    Grant proposals approved - round 2

                    Grant proposals approved - round 1

                    Pledges/amount received

Source: GAO analysis of Fund documents.


Note: A shortfall in the funding of already approved grants is evident when one compares 5-year
commitments with total pledges over this time frame. The small amount of resources available for
funding new grants is evident when comparing 2-year commitments with pledges through 2003.
a
The pledges expected through 2008 include $173 million that has no specified arrival date.
b
 These numbers represent the maximum amount approved by the board. Final budgets may be
reduced during grant agreement negotiations. Five-year figures are potential, rather than guaranteed,
commitments.




Page 35                                                                 GAO-03-601 Global Health
                           The Fund has estimated that it will need at least $6.3 billion in pledges for
                           2003–2004 to continue approving new proposals and finance the grants
                           already approved in rounds 1 and 2.33 The Fund is looking to raise these
                           resources from both public and private sources, with $2.5 billion needed in
                           2003 alone. As of April 1, 2003, only $834 million had been pledged for 2003,
                           6 percent of which came from the private sector.34



Improvements in            The Fund has established detailed objectives, criteria and procedures for
                           its grant decision process and is making enhancements to the process in
Grant-Making               response to concerns raised by participants and stakeholders. Several
Processes Enhance          improvements were made to the proposal review process between the first
                           and second proposal rounds, and the Fund has committed to further
Fund’s Ability to          improvement. These efforts will seek to address ongoing challenges,
Achieve Key                including ensuring that the money from the Fund supplements existing
Objectives, but            spending for HIV/AIDS, TB, and malaria and that recipients are able to use
                           the new aid effectively. The Fund has recognized these challenges, but its
Challenges Remain          efforts to address them are still evolving.



Improvements in Proposal   The Fund has made improvements in its proposal review and grant-making
Review and Grant-Making    process to support key objectives, but assessment criteria and procedures
                           are still evolving. According to the Fund, criteria for successful proposals
Process Support Key
                           include (1) technical soundness of approach, (2) functioning relationships
Objectives                 with local stakeholders, (3) feasible plans for implementation and
                           management, (4) potential for sustainability, and (5) appropriate plans for
                           monitoring and evaluation. In addition, the Fund states that successful
                           proposals will address the abilities of recipients to absorb the grant money.
                           Using these criteria, the Fund established a grant approval process, based
                           primarily on an independent evaluation of proposals by the TRP (see fig. 8).




                           33
                            This resource needs estimate is reduced from an earlier one made at the October 2002
                           board meeting, which called for three proposal rounds in 2003 (rather than the currently
                           planned two rounds), and projected a need of $7.9 billion through 2004.
                           34
                             In addition to seeking direct monetary contributions, the Fund is also trying to encourage
                           in-kind contributions, such as equipment or drugs, as well as skills and services, directly to
                           recipients. While some in-kind donations have been made at the country level, the Fund
                           itself cannot accept them directly at a global level since it is only a financing mechanism.




                           Page 36                                                            GAO-03-601 Global Health
Figure 8: Global Fund Proposal Review Process


                   Proposal in-flow
   Call for                             Technical review   Board meeting/    Additional
                   and screening                                                              Final approval
   proposals                            panel evaluation   grant decisions   clarifications
                   by secretariat

        Technical Review
        Panel selection


Source: Adapted by GAO from Fund documents.




Between the first and second proposal rounds, the Fund made several
improvements to the process, based on feedback from participants and the
work of one of the Board’s committees. These improvements included
revising the proposal forms and instructions to make them more
comprehensive and better support the criteria for successful proposals as
determined by the Fund. The Fund also added additional members with
cross-cutting expertise to the Technical Review Panel to allow it to better
evaluate nonmedical development–related aspects of the proposal, and
lengthened the proposal application period from 1 month in round 1 to 3
months in round 2 to give applicants more time to develop their proposals.
According to Fund and other officials, these improvements helped increase
the overall quality of grant proposals submitted in the second proposal
round. The Fund also made all successful proposals from the second round
publicly available on its Web site, increasing the amount of information
available to all interested parties regarding Fund-supported programs.

Some board members expressed concerns between the first and second
proposal rounds regarding the way the Fund was addressing its objective of
giving due priority to the countries with the greatest need. In particular, the
board members were concerned that countries with the greatest need, as
determined by poverty and disease burden, might be least able to submit
high-quality proposals, resulting in their systematic exclusion. In the first
two proposal rounds, the Fund excluded only the highest income countries




Page 37                                                                          GAO-03-601 Global Health
from grant eligibility. 35 However, the Fund stated that priority would be
given to proposals from the neediest countries. Most of the grants
approved in rounds 1 and 2 did in fact go to recipients in countries defined
by the World Bank as low income, demonstrating that the poorest countries
were not being excluded. No money was awarded in countries defined as
high income, and only 3 percent of the money was awarded in countries
defined as upper-middle income (see fig. 9). Similarly, sub-Saharan Africa,
the region that suffers from the highest burden of disease for HIV/AIDS,
received 61 percent of the money for HIV/AIDS programs. (See app. IV for
more detailed information.)



Figure 9: Grant Money by Country Income Levela

                                                   3%
                                                   Upper middle income



                              •



                                     27% •         Lower middle income




                   70% •                           Low income




Source: GAO analysis of Fund data.

a
Based on maximum allowable grant money for full length of Board approved programs.



35
 Members of the Organization for Economic Cooperation and Development’s (OECD)
Development Assistance Committee are ineligible. These countries are Australia, Austria,
Belgium, Canada, Denmark, Finland, France, Germany, Greece, Ireland, Italy, Japan,
Luxembourg, Netherlands, New Zealand, Norway, Portugal, Spain, Sweden, Switzerland, the
United Kingdom, the United States, and the Commission of the European Communities.




Page 38                                                             GAO-03-601 Global Health
                                 However, to further ensure that this key objective is supported, particularly
                                 in the face of increasingly scarce resources, the Fund has altered its
                                 eligibility criteria for round 3 to focus more clearly on need. All high-
                                 income countries are now excluded from eligibility for Fund money,36 and
                                 upper-middle and lower-middle income countries must meet additional
                                 criteria such as having cofinancing arrangements and a focus on poor or
                                 vulnerable populations. Low-income countries remain fully eligible to
                                 request support from the Fund. Beginning in the fourth round, WHO and
                                 UNAIDS will be asked to provide matrices categorizing countries by
                                 disease-related need37 and poverty.



Challenges to Grant-Making       The Fund and other stakeholders note that meeting key grant-making
Process Remain                   criteria will be a challenge, and the Fund’s efforts to address these criteria
                                 are still evolving. According to Fund guidelines, proposals should
                                 demonstrate how grants complement and augment existing programs and
                                 how these additional resources can be effectively absorbed and used.38

Ensuring that Grants             The Fund’s policy is that both the pledges the Fund receives and the grants
Complement and Add to Existing   it awards must complement and add to existing spending on the three
Spending                         diseases. However, ensuring adherence to this policy is difficult. According
                                 to the secretariat, it monitors the sources of new pledges to assess whether
                                 the pledges represent additional spending. Monitoring pledges is
                                 problematic, however, because it can be difficult to determine how much
                                 money was spent by a donor or multilateral institution specifically on
                                 AIDS, TB, or malaria-related programs. According to a UNAIDS report,
                                 pledges to the Fund from most of the G-7 countries,39 as well as from eight



                                 36
                                  Previously, only high-income countries included in the OECD’s Development Assistance
                                 Committee were excluded. See footnote 35 for membership. Country income categories are
                                 based on World Bank documents.
                                 37
                                  According to Fund documents, disease-related need encompasses both current and
                                 potential burden of disease.
                                 38
                                  The capacity to absorb new aid hinges on a country’s ability to effectively combine its
                                 domestic resources, such as labor and managerial capacity, with the additional foreign
                                 assistance.
                                 39
                                      The United States, Canada, Japan, France, Germany, Italy, and the United Kingdom.




                                 Page 39                                                            GAO-03-601 Global Health
of the Development Assistance Committee40 governments, have thus far
been determined to add to baseline HIV/AIDS funding. Nonetheless, despite
its monitoring efforts, the Fund can only encourage, rather than require,
donors to contribute new spending rather than simply transfer funds from
related programs.

It is also difficult for the Fund to ensure that the grants it awards will
augment existing spending at the country level. It has identified several
situations to be avoided, including allowing grants to replace budgetary
resources or other “official development assistance,” and it has taken
certain steps to ensure that the grants will in fact represent new and added
spending in the country. For example, the Fund has required all applicants
to include information in their proposals on how the funds requested would
complement and supplement existing spending and programs. In addition,
the Fund has reserved the right to terminate grants if it discovers that they
are substituting for, rather than supplementing, other resources.41 However,
the Fund does not have the ability to formally monitor whether grants
constitute additional spending once disbursed, and we anticipate that
doing so would be difficult. Even if the Fund succeeded in documenting
that all grant money was spent appropriately on the approved project and
that no previously allocated money for AIDS, TB, or malaria was
supplanted in the process, it still could not document the level of spending
on these diseases that would have occurred without the grant. Thus, it
could not show whether the grant in fact substituted for money that would
have been otherwise allocated. A report presented at the Fund’s October
2002 board meeting proposed the development of a policy for monitoring
additionality.

At present, lacking any formal system, the Fund may be unaware of, or
unprepared to address, situations in which its grants do not represent
additional, complementary spending. For example, an official from a
development agency that currently funds much of one country’s TB
program stated that he believes the country lacks the capacity to increase

40
     See footnote 35 for Development Assistance Committee membership.
41
 Grant Agreement, Article 9: “In accordance with the criteria governing the selection and
award of this Grant, the Global Fund has awarded the Grant to the Principal Recipient on
the condition that the Grant is in addition to the normal and expected resources that the
Host Country usually receives or budgets from external or domestic sources. In the event
such other resources are reduced to an extent that it appears, in the sole judgment of the
Global Fund, that the Grant is being used to substitute for such other resources, the Global
Fund may terminate this Agreement in whole or in part under Article 21 of this Agreement.”




Page 40                                                           GAO-03-601 Global Health
                                its program for TB, despite having received a TB grant in the first round.
                                The development agency therefore planned to transfer its current TB
                                funding to other health assistance projects in response to the Fund’s TB
                                grant, raising questions of whether the grant will fulfill its purpose of
                                providing additional funding for TB. Similar concerns have been
                                expressed by other officials representing both Fund recipients and donors.

Ensuring that Recipients Have   Although the Fund has stated that proposals will be assessed based on
the Capacity to Absorb New      whether they have demonstrated how grants could be effectively absorbed
Funding                         and used, Fund officials, donors, and others have raised concerns
                                regarding the actual capacity of recipients to absorb new aid.42 While some
                                countries may have surplus labor and institutional capacity within their
                                health sectors, other countries may have difficulty rapidly expanding their
                                health sectors due to a shortage of skilled health workers or insufficient
                                infrastructure to deliver health services. While such capacity constraints
                                can be relieved over time with additional training and investment, in the
                                short run they could limit the effectiveness of expanded health spending.
                                For example, officials in one country told us that it has been slow in
                                disbursing its World Bank HIV/AIDS money because of difficulties in
                                establishing the necessary institutions to identify and distribute funds to
                                effective projects. In another country, government and NGO officials cited
                                a lack of administrative capacity in NGOs as a likely challenge to their
                                ability to absorb the Fund grant. The Fund is aware of these concerns and
                                is addressing them in a number of ways. Proposal applications must
                                describe the current national capacity—the state of systems and services—
                                available to respond to HIV/AIDS, TB, and malaria. After the first round, the
                                Fund also added more members to the TRP to evaluate these issues in
                                proposals. In addition, the Fund requires LFAs to preassess principal
                                recipients to ensure that they are prepared to receive, disburse, and
                                monitor the money. On at least one occasion, the Fund decided to reduce
                                its initial grant disbursement to a recipient, based on concerns raised by
                                the LFA in the preassessment.




                                42
                                  In this report, “absorptive capacity” refers to the ability of a country to effectively use
                                development assistance. Absorptive capacity is affected by resource constraints at various
                                levels, including institutional capacity within the health sector and the capacity of the larger
                                economy to absorb an influx of foreign exchange.




                                Page 41                                                              GAO-03-601 Global Health
 The LFA preassessment does not address all potential constraints on a
country’s ability to absorb new funds, notably across sectors or at the
macroeconomic level. While these capacity constraints could hinder the
effectiveness of the grant, they could also generate unintended side effects
beyond the scope of the funded project. Introducing more money into a
sector with insufficient capacity to utilize it could draw scarce resources
from other vital sectors, such as agriculture or education. For example, one
way to reduce temporary shortages of skilled health workers would be to
raise the salaries of those positions, relative to the rest of the economy.
Over time, this wage disparity will provide an incentive to increase the
number of graduates trained in the health field. However, in the short term,
it may encourage already skilled workers in other sectors to pursue higher
wages in the health sector, adversely affecting the sectors they leave. To the
extent that these other sectors are also priorities in economic
development, this could adversely affect a country’s pursuit of poverty
reduction. The country coordinating mechanism model of proposal
development is intended to help avoid such problems by ensuring that
those with the most knowledge of a country’s needs and capacities are
directly responsible for developing proposals. However, as discussed
earlier, many CCMs are facing challenges in operating effectively.

The provision of large amounts of new foreign aid to countries from all
sources, including the Global Fund and bilateral and multilateral initiatives,
may also have unintended, detrimental macroeconomic implications. Large
increases in development assistance are considered critical to the
successful fight of the three diseases, as well as the achievement of long-
term poverty reduction goals. Moreover, increasing the number of healthy
people in a country, such as through successful treatment, may increase its
productive capacity. However, increasing spending beyond a country’s
productive capacity could result in problems, such as increased domestic




Page 42                                                 GAO-03-601 Global Health
inflation, that are not conducive to growth or poverty reduction.43 While a
substantial share of Global Fund grant money is expected to fund imports
such as medicines–-which likely have no adverse macroeconomic
implications–-a significant amount will also be spent domestically on
nontraded items, such as salaries and construction expenses. Concerns
over potential macroeconomic difficulties prompted one government to
initially propose offsetting its Global Fund grant with reductions in other
health spending; however, upon further assessment the government
reconsidered and will not reduce other health spending. An International
Monetary Fund official stated that he believed that the Global Fund grants
are not generally large enough, as a share of a country’s Gross Domestic
Product, to cause significant macroeconomic effects. He added, however,
that country authorities should nonetheless monitor these grants in case
they do become significant and possibly destabilizing. The Global Fund
expects that the amount of money that it disburses will rise substantially in
the future, which—along with large increases in other proposed
development assistance, such as through the U. S. Millennium Challenge
Account44--–could substantially increase total aid flows to certain countries
in a relatively short period of time. Available research on the
macroeconomic effects of large increases in overall grant aid is thus far
inconclusive, providing little guidance on the magnitude of assistance that
may trigger these negative macroeconomic impacts.




43
  Increases in grant assistance contribute to a rising domestic money supply as the
government exchanges the hard currency grant assistance for local currency at the central
bank. The resulting rise in the domestic money supply increases aggregate demand,
contributing to higher inflation if the economy is at or near its short-run productive capacity.
The increase in foreign exchange is also likely to lead to an appreciation of the real
exchange rate under a fixed exchange rate regime, which is common in poor countries.
Under a fixed system, maintenance of the nominal rate in the presence of inflation results in
real currency appreciation. Real currency appreciation increases a country’s export prices,
rendering it less competitive internationally, reducing its export earnings and weakening its
trade balance.
44
  On March 14, 2002, President Bush announced that the United States planned to increase
its core assistance to developing countries by 50 percent over the next 3 years, resulting in a
$5 billion annual increase over current levels by fiscal year 2006. The Millennium Challenge
Account will receive the increased aid to fund initiatives to improve the economies and
standards of living in qualified developing countries. The President submitted his plan for
the Millennium Challenge Account to Congress in February 2003.




Page 43                                                              GAO-03-601 Global Health
Agency Comments and   We requested comments on a draft of this report from the Executive
                      Director of the Fund, the Secretary of Health and Human Services, the
Our Evaluation        Secretary of State, and the Administrator of USAID, or their designees. We
                      received formal comments from the Fund as well as a combined formal
                      response from the Department of Health and Human Services, the
                      Department of State, and USAID (see apps. V and VI). Both the Fund and
                      the U.S. agencies agreed with the information and analysis presented in this
                      report. The Fund’s Executive Director concluded that this report
                      accurately describes the challenges faced by the Fund in responding to the
                      three diseases. The Fund outlined measures it is taking to address these
                      challenges and identified several additional challenges. The U.S. agencies
                      stressed that they and other donor agencies should work with the Fund to
                      address the challenges. Both the Fund and the U.S. agencies also submitted
                      informal, technical comments, which we have incorporated into this report
                      as appropriate.

                      We are sending copies of this report to the Executive Director of the Fund,
                      the Secretary of Health and Human Services, the Secretary of State, the
                      Administrator of USAID, and interested congressional committees. Copies
                      of this report will also be made available to other interested parties on
                      request. In addition, this report will be made available at no charge on the
                      GAO Web site at http://www.gao.gov.

                      If you or your staff have any questions about this report, please contact me
                      at (202) 512-3149. Other GAO contacts and staff acknowledgments are
                      listed in appendix V.

                      Sincerely yours,




                      David Gootnick, Director
                      International Affairs and Trade




                      Page 44                                               GAO-03-601 Global Health
Appendix I

Objectives, Scope, and Methodology                                                         AA
                                                                                            ppp
                                                                                              ep
                                                                                               ned
                                                                                                 n
                                                                                                 x
                                                                                                 id
                                                                                                  e
                                                                                                  x
                                                                                                  Iis




              At the request of the Chairman of the House Committee on Appropriations,
              Subcommittee on Foreign Operations, Export Financing and Related
              Programs, we assessed (1) the Fund’s progress in developing governance
              structures; (2) the systems that the Fund has developed for ensuring
              financial accountability, monitoring and evaluating grant projects, and
              procuring goods and services; (3) the Fund’s efforts to mobilize resources;
              and (4) the Fund’s grant decision-making process.

              To assess how the Fund has progressed in establishing structures needed
              for governance, we reviewed Fund documents and reports from
              nongovernmental organizations involved in the country coordinating
              mechanism (CCM) process. We also interviewed Fund officials in Geneva
              and U.S. government officials from the Departments of State and Health
              and Human Services and the U.S. Agency for International Development. In
              addition, we traveled to Haiti and Tanzania, two “fast-track” countries
              where grant agreements were about to be signed, and two countries less far
              along in the process, Ethiopia and Honduras. In these four countries, we
              met with a wide variety of CCM members, including high-level and other
              government officials, multilateral and bilateral donors, faith-based and
              other nongovernmental organizations, professional associations, and
              private sector groups. In all four countries, we met with organizations
              designated as the principal recipient in grant proposals. We also met with a
              Fund official who was working with the CCM in Haiti. To understand the
              Fund’s administrative services agreement with the World Health
              Organization (WHO) and its impact on the Fund’s ability to quickly disburse
              grants, we reviewed Fund documents pertaining to the agreement, met
              with WHO and Fund officials in Geneva and spoke with a U.S. government
              legal expert in Washington, D.C. We also met with a WHO official while he
              was traveling in San Francisco.

              To assess the Fund’s development of oversight systems to ensure financial
              and program accountability, we reviewed Fund documents prepared for the
              second, third, and fourth board meetings; requirements contained in the
              grant agreements; and Fund working papers prepared after the fourth
              board meeting that propose further clarifications and guidelines for
              principal recipients and Local Fund Agents (LFAs). We also reviewed the
              U.S. Agency for International Development’s (USAID) Handbook of
              indicators for programs on human immunodeficiency virus/acquired
              immunodeficiency syndrome (HIV/AIDS) and sexually transmitted
              infections, Joint United Nations HIV/AIDS Program publications for
              monitoring and evaluating national AIDS programs, and WHO coordinates
              for charting progress against HIV/AIDS, tuberculosis and malaria. We held



              Page 45                                               GAO-03-601 Global Health
Appendix I
Objectives, Scope, and Methodology




discussions with the secretariat in Geneva on fiduciary and financial
accountability and monitoring and evaluation of grant programs and
received presentations on these topics from the secretariat. In addition, we
discussed these issues with U.S. government officials from the
Departments of State and Health and Human Services and USAID, and with
officials from the World Bank. During our fieldwork in Haiti and Tanzania,
we met with representatives of the entities serving as local fund agents in
those countries (KPMG in Haiti and PricewaterhouseCoopers in Tanzania);
we also met with representatives from KPMG’s Global Grants Program in
San Francisco. To further our understanding of the Fund’s oversight
systems and the challenges to implementing them in recipient countries,
we met with the following groups in all four of the countries we visited:
government officials, multilateral and bilateral donors, nongovernmental
organizations, and others who will be involved in implementing Fund
grants or who had observations on the Fund’s oversight systems.

To assess the Fund's procurement guidelines, we reviewed the grant
agreements and data prepared by the Fund showing anticipated spending
on drugs and other items and met with Fund officials in Geneva. We also
interviewed a U.S. legal expert serving on the procurement and supply
management task force and reviewed documents prepared by taskforce
and the Portfolio Management and Procurement Committee at the request
of the board. To learn about the ability of grant recipients to procure goods
and services, we met with local fund agent representatives, a principal
recipient, and subrecipients. We asked the principal recipient and
subrecipient representatives about their procurement practices, their
understanding of Fund guidance and their plans to procure medicines,
goods and services. In Washington, D.C., we met with staff from a public
health consulting firm who assessed one of the principal recipients. To
further our understanding of the procurement process, we also interviewed
representatives from several other consulting firms that assist developing
country governments and nongovernmental organizations with
procurement.

To assess Fund efforts to mobilize resources, we analyzed pledges made to
the Fund from public and private sources as well as the Fund’s
commitments to grants. We reviewed their expected future financial needs
to make new grants and finance already approved grants. In addition, we
contacted officials from the Fund to discuss their resource mobilization
efforts and strategies for dealing with a resource shortfall.




Page 46                                                GAO-03-601 Global Health
Appendix I
Objectives, Scope, and Methodology




To assess the Fund’s grant-making process, we reviewed the objectives and
processes of their proposal review and approval processes. We reviewed
Fund documents, including proposal applications and guidelines from the
first and second proposal rounds. Additionally we tracked the Fund’s
efforts at improving the grant-making process by reviewing documents
prepared for the Fund’s first four board meetings. We also interviewed
representatives from the Fund and the technical review panel in Geneva
and Washington, D.C., and we asked government, donor, and
nongovernmental organization officials in the four recipient countries we
visited for their assessment of the proposal process and its challenges. To
assess the nature of the challenges identified and any efforts made by the
Fund to address them, we interviewed officials at the World Bank and
International Monetary Fund, and we conducted a review of relevant
economic literature. We also conducted research and reviewed data
available on global spending on HIV/AIDS, TB, and malaria.

For general background and additional perspectives on the Fund, we spoke
with representatives from the Gates Foundation, the Global AIDS Alliance,
and the Earth Institute at Columbia University.

We conducted our work in Washington, D.C.; San Francisco; Geneva,
Switzerland; Ethiopia; Haiti; Honduras; and Tanzania, from April 2002
through April 2003, in accordance with generally accepted government
auditing standards.




Page 47                                              GAO-03-601 Global Health
Appendix II

Status of Round 1 Grants                                                                                                      Appendx
                                                                                                                                    Ii




Table 2: Signed Grant Agreements—Funds Committed and Disbursed

                                                                                                               Total funds
                                                                                                             disbursed as
                                                                                Total funds                    of April 22,
                                                                      Date of   committed             Latest          2003
                           Principal            Local Fund             signed       (in U.S.   disbursement        (in U.S.
No Country       Program   recipient            Agent              agreement       dollars)a           dateb      dollars)
1    Argentina   HIV/AIDS U.N. Development Pricewaterhouse          29-Jan-03   $12,177,200       21-Mar-03     $1,500,000
                          Program (UNDP) Coopers (PWC)
2    Benin       Malaria   UNDP                 PWC                20-Mar-03      2,389,185        14-Apr-03       341,021
3    Burundi     HIV/AIDS Minsitry of Health    PWC                 04-Apr-03     4,877,000        17-Apr-03       554,100
4    Cambodia    HIV/AIDS Ministry of Health, KPMG                  27-Jan-03    11,242,538        17-Apr-03        95,919
                          Kingdom of
                          Cambodia
5    China       TB        Chinese Center       U.N. Office for     30-Jan-03    25,370,000        10-Apr-03     1,200,000
                           for Disease          Project Services
                           Control and          (UNOPS)
                           Prevention,
                           Ministry of Health
6    China       Malaria   Chinese Center       UNOPS               30-Jan-03     3,523,662        10-Apr-03       542,800
                           for Disease
                           Control and
                           Prevention,
                           Ministry of Health
7    Ethiopia    TB        Ministry of Health   KPMG               18-Mar-03     10,962,600
8    Ghana       HIV/AIDS The Ministry of   PWC                    12-Dec-02      4,965,478       18-Dec-02        429,599
                          Health of the
                          Republic of Ghana
9    Ghana       TB        The Ministry of   PWC                   12-Dec-02      2,336,940       18-Dec-02        468,270
                           Health of the
                           Republic of Ghana
10   Haiti       HIV/AIDS Fondation             Mérové-Pierre -    12-Dec-02     17,945,067        10-Feb-03     2,690,782
                          SOGEBANK              Cabinet
                                                d'Experts-
                                                Comptablesc
11   Haiti       HIV/AIDS UNDP                  Mérové-Pierre -    12-Dec-02      6,754,697        10-Feb-03       926,762
                                                Cabinet
                                                d'Experts-
                                                Comptablesc
12   Honduras    HIV/AIDS UNDP                  Pricewaterhouse     29-Jan-03    12,583,466         2-Apr-03       685,735
                                                Coopers
                                                Interamerica S.
                                                de R.L.




                                           Page 48                                                  GAO-03-601 Global Health
                                            Appendix II
                                            Status of Round 1 Grants




(Continued From Previous Page)
                                                                                                                   Total funds
                                                                                                                 disbursed as
                                                                                    Total funds                    of April 22,
                                                                          Date of   committed             Latest          2003
                            Principal            Local Fund                signed       (in U.S.   disbursement        (in U.S.
No Country        Program   recipient            Agent                 agreement       dollars)a           dateb      dollars)
13   Honduras     TB        UNDP                 Pricewaterhouse        29-Jan-03    3,790,500          2-Apr-03       514,731
                                                 Coopers
                                                 Interamerica S.
                                                 de R.L.
14   Honduras     Malaria   UNDP                 Pricewaterhouse        29-Jan-03    4,096,050          2-Apr-03       379,889
                                                 Coopers
                                                 Interamerica S.
                                                 de R.L.
15   India        TB        Ministry of Health   World Bank (in         30-Jan-03    5,650,999
                                                 process of being
                                                 finalized)
16   Indonesia    TB        Ministry of Health   PWC                    27-Jan-03   21,612,265        13-Mar-03        750,000
17   Kenya        HIV/AIDS Sanaa Art             PWC                   30-Mar-03     2,650,813         15-Apr-03       137,270
                           Promotions
18   Kenya        HIV/AIDS KENWA                 PWC                   30-Mar-03       220,875         15-Apr-03         8,500
19   Lao          HIV/AIDS Ministry of Health, KPMG                    05-Feb-03     1,307,664
     People's              Department of
     Democratic            Hygiene &
     Republic              Prevention
20   Lao          Malaria   Ministry of Health, KPMG                   05-Feb-03     3,155,152
     People's               Department of
     Democratic             Hygiene &
     Republic               Prevention
21   Madagascar Malaria     Population           PWC                   05-Feb-03     1,482,576        12-Mar-03        591,931
                            Services
                            International
22   Malawi       HIV/AIDS National Aids         PWC                   10-Feb-03    41,751,500
                           Committee
23   Moldova      HIV/AIDS Ministry of Health    PWC                   20-Mar-03     5,257,941         22-Apr-03       880,000
                  -TB
24   Mongolia     TB        Ministry of Health   UNOPS                 05-Feb-03       644,000          9-Apr-03        42,960
25   Morocco      HIV/AIDS Ministry of Health    PWC                    29-Jan-03    4,738,806        21-Feb-03        420,000
26   Panama       TB        UNDP                 PWC                   10-Feb-03       440,000        20-Mar-03        112,000
27   Rwanda       HIV/AIDS Ministry of Health    Crown Agents           10-Apr-03    8,409,268         17-Apr-03       790,854
                  -TB
28   Senegal      HIV/AIDS National AIDS         KPMG                  10-Feb-03     6,000,000         28-Feb-03       600,000
                           Council of
                           Senegal




                                            Page 49                                                     GAO-03-601 Global Health
                                            Appendix II
                                            Status of Round 1 Grants




(Continued From Previous Page)
                                                                                                                   Total funds
                                                                                                                 disbursed as
                                                                                    Total funds                    of April 22,
                                                                          Date of   committed             Latest          2003
                            Principal            Local Fund                signed       (in U.S.   disbursement        (in U.S.
No Country        Program   recipient            Agent                 agreement       dollars)a           dateb      dollars)
29   Senegal      Malaria   National Strategic   KPMG                  10-Feb-03     4,285,714         28-Feb-03       350,000
                            Plan to Fight
                            Malaria, Ministry
                            of Health
30   Serbia       HIV/AIDS Economics             UNOPS                  16-Apr-03    2,718,714
                           Institute
31   Sri Lanka    Malaria   Ministry of Health   PWC                   19-Dec-02       730,140         11-Feb-03       176,573
                            of Sri Lanka
32   Sri Lanka    Malaria   Lanka Jatika         PWC                   19-Dec-02     4,467,480         11-Feb-03       752,893
                            Sarvodaya
                            Shramadana
                            Sangamaya
33   Sri Lanka    TB        Ministry of Health   PWC                   19-Dec-02     2,384,980         11-Feb-03       478,073
                            of Sri Lanka
34   Sri Lanka    TB        Lanka Jatika         PWC                   19-Dec-02       475,020         11-Feb-03        75,260
                            Sarvodaya
                            Shramadana
                            Sangamaya
35   Tajikistan   HIV/AIDS UNDP                  PWC                   31-Mar-03     1,474,520         22-Apr-03       206,702
36   Tanzania     Malaria   The Ministry of    Pricewaterhouse         11-Dec-02    11,959,076          4-Feb-03       489,478
                            Health of the      Coopers Limited
                            Government of the
                            United Republic of
                            Tanzania
37   Uganda       HIV/AIDS Ministry Of       PWC                       06-Mar-03    36,314,892
                           Finance, Planning
                           And Economic
                           Development Of
                           The Government
                           Of Uganda
38   Ukraine      HIV/AIDS National AIDS         PWC                   19-Mar-03     6,150,000
                           Foundation
39   Ukraine      HIV/AIDS Ministry of Health    PWC                    29-Jan-03   16,925,200         17-Apr-03       481,926
40   Ukraine      HIV/AIDS UNDP                  PWC                   17-Feb-03     1,895,011
41   Worldwide    HIV/AIDS World Lutheran        KPMG-Geneva            29-Jan-03      485,000
     regions               Federation
42   Zambia       HIV/AIDS Central Board of      PWC                   30-Mar-03    21,214,271
                           Health
43   Zambia       TB        Central Board of     PWC                   30-Mar-03    12,447,294
                            Health




                                            Page 50                                                     GAO-03-601 Global Health
                                              Appendix II
                                              Status of Round 1 Grants




(Continued From Previous Page)
                                                                                                                               Total funds
                                                                                                                             disbursed as
                                                                                                Total funds                    of April 22,
                                                                                  Date of       committed             Latest          2003
                              Principal              Local Fund                    signed           (in U.S.   disbursement        (in U.S.
No Country          Program   recipient              Agent                     agreement           dollars)a           dateb      dollars)
44    Zambia        HIV/AIDS Churches Health         PWC                        30-Mar-03         6,614,958
                             Association
45    Zambia        TB        Churches Health        PWC                        30-Mar-03         2,307,962
                              Association
46    Zanzibar      Malaria   Ministry of Health     PWC                        06-Mar-03           781,220
47    Zimbabwe      Malaria   Ministry of Health     PWC                        05-Feb-03         6,716,250
Total signed agreements as of April 22, 2003                                                  $366,683,944                          $17,674,028
Source: The Fund.

                                              Note: blank cells indicate that no disbursement had been made as of April 22, 2003.
                                              a
                                               Amounts may differ from grant ceilings approved by the board because budgets may be reduced
                                              during grant agreement negotiations.
                                              b
                                                  Date disbursement request was sent from the Fund to the World Bank.
                                              c
                                               Affiliated with KPMG.




                                              Page 51                                                                   GAO-03-601 Global Health
                                                  Appendix II
                                                  Status of Round 1 Grants




Table 3: Grant Agreements in the Pipeline

                                                                                               Total funds                                Total funds
                                                   Local                Date of                committed               Latest        disbursed as of
                                                   Fund                 signed                     (in U.S.     disbursement           April 22, 2003
No Country          Program    Principal recipient Agent                agreement                 dollars)a             dateb        (in U.S. dollars)
48    South         HIV/AIDS   National Treasury          PWC           Not yet signed          $2,354,000
      Africa        -TB        (Soul City)
49    South         HIV/AIDS   National Treasury          PWC           Not yet signed          12,000,000
      Africa        -TB        (Love Life)
50    South         HIV/AIDS   National Treasury          PWC           Not yet signed          26,741,529
      Africa        -TB        (Kwazulu Natal
                               Sub-CCM)
51    Tanzania      HIV/AIDS President's Office of PWC                  Not yet signed           5,400,000
                             Regional
                             Administration &
                             Local Government
                             (PORALG)
52    Zambia        Malaria    Central Board of           PWC           Not yet signed          17,892,000
                               Healthc
53    Zambia        Malaria    Churches Health            PWC           Not yet signed
                               Associationc
54    Zambia        HIV/AIDS Minsitry of Finance          PWC           Not yet signed          14,468,771
                             & National
                             Planningc
55    Zambia        HIV/AIDS Zambia National              PWC           Not yet signed
                             AIDS Networkc
56    Zambia        TB         Zambia National            PWC           Not yet signed           1,644,744
                               AIDS Network
57    Zimbabwe      HIV/AIDS National Aids                PWC           Not yet signed          10,300,000
                             Council
Total agreements in the pipeline as of April 22, 2003                                         $90,801,044
Source: The Fund.

                                                  Note: blank cells indicate that no disbursement had been made as of April 22, 2003.
                                                  a
                                                   Amounts may differ from grant ceilings approved by the board because budgets may be reduced
                                                  during grant agreement negotiations.
                                                  b
                                                      Date disbursement request was sent from the Fund to the World Bank.
                                                  c
                                                   the exact amounts to be disbursed to principal recipients have not yet been decided.




                                                  Page 52                                                                   GAO-03-601 Global Health
                                            Appendix II
                                            Status of Round 1 Grants




Table 4: Grant Agreements Pending, but Less Far Along in the Process

                                                                      Date                   Total funds                     Total funds
                                                                      agreement              committed           Latest disbursed as of
                                Principal          Local Fund         expected to                (in U.S. disbursement    April 22, 2003
No Country          Program     recipient          Agent              be signed                 dollars)a         dateb (in U.S. dollars)
58    Chile         HIV/AIDS    nongovernmental To be                                        $13,574,098
                                organization     determined
                                (specifics to be
                                determined)
59    Democratic TB             To be determined Global Fund                                   2,294,000
      People's                                   secretariat
      Republic of
      Korea
60    Indonesia     HIV/AIDS    Ministry of Health PWC                Being                    6,924,971
                                                                      negotiated
61    Indonesia     Malaria     Ministry of Health PWC                Being                   16,018,800
                                                                      negotiated
62    Mali          Malaria     Ministry of Health KPMG                                        2,023,424
63    Nigeria       HIV/AIDS    Yakubu Gown        KPMG               Being                   17,722,103
                                Center                                negotiated
64    Nigeria       HIV/AIDS    Yakubu Gown        KPMG               Being                    8,708,684
                                Center                                negotiated
65    Nigeria       HIV/AIDS    Yakubu Gown        KPMG               Being                    1,687,599
                                Center                                negotiated
66    Thailand      TB          Ministry of Health PWC                Being                    6,999,350
                                                                      negotiated
67    Thailand      HIV/AIDS    Ministry of Health PWC                Being                   30,933,204
                                                                      negotiated
68    Vietnam       HIV/AIDS    Ministry of Health KPMG                                          7,500,00
69    Vietnam       TB          Ministry of Health KPMG                                        2,500,000
Total pending agreements as of April 22, 2003                                              $109,386,233
Total agreements (signed, in pipeline, and pending) as of April 22, 2003                   $566,871,221
Source: The Fund.

                                            Note: blank cells indicate that no disbursement had been made as of April 22, 2003, or that
                                            negotiations for signing the grant agreement had not yet begun as of that date.
                                            a
                                             Amounts may differ from grant ceilings approved by the board because budgets may be reduced
                                            during grant agreement negotiations.
                                            b
                                            Date disbursement request was sent from the Fund to the World Bank.




                                            Page 53                                                                 GAO-03-601 Global Health
Appendix III

Drug Procurement Cycle                                                                       Appendx
                                                                                                   iI




               The drug procurement cycle includes most of the decisions and actions
               that health officials and caregivers must take to determine the specific drug
               quantities obtained, prices paid, and quality of drugs received. The process
               generally requires that those responsible for procurement (1) decide which
               drugs to procure; (2) determine what amount of each medicine can be
               procured, given the funds available; (3) select the method they will use for
               procuring, such as open or restricted tenders; (4) identify suppliers capable
               of delivering medicines; (5) specify the conditions to be included in the
               contract; (6) check the status of each order; (7) receive and inspect the
               medicine once it arrives; (8) pay the suppliers; (9) distribute the drugs,
               making sure they reach all patients; (10) collect information on how
               patients use the medicine; and (11) review drug selections. Because these
               steps are interrelated, those responsible for drug procurement need
               reliable information to make informed decisions.




               Page 54                                                GAO-03-601 Global Health
Appendix III
Drug Procurement Cycle




Note: the adaptation is from Managing Drug Supply, 2nd edition, revised and expanded, Hartford, CT,
Kumarian Press, 1997.




Page 55                                                                GAO-03-601 Global Health
Appendix IV

Indicators of Need for Recipient Countries                                                                              Appendx
                                                                                                                              iIV




                                             Amount
                                      requested by HIV/AIDS
                  Diseases being   approved grants rate (%),     Malaria                   Human         Gross National
                  addressed by     for full length of Adults     (Cases/   TB (Cases/ Development    Income per capita
Countrya          Fund grants              programs   (15-49)   100,000)     100,000)       Indexb     (in U.S. dollars)c
Low Income
Afghanistan       HIV/AIDS,             $3,125,605        NA      1,825          325           NA                    NA
                  Malaria, TB
Armenia           HIV/AIDS               7,249,981        0.2        NA           58           76                $2,580
Bangladesh        HIV/AIDS              19,961,030        <.1        47          241          145                  1,590
Benin             HIV/AIDS, TB,         23,803,254        3.6    11,845          266          158                    980
                  Malaria
Burkina Faso      HIV/AIDS,             26,776,825        6.5     5,852          319          169                    970
                  Malaria
Burundi           HIV/AIDS,             26,423,125        8.3    28,031          382          171                    580
                  Malaria
Cambodia          HIV/AIDS, TB,         47,460,470        2.7       473          560          130                  1,440
                  Malaria
Central African   HIV/AIDS              25,090,588       12.9     2,485          415          165                  1,160
Republic
Chad              TB                     3,039,327        3.6       190          270          166                    870
Comores           Malaria                2,485,878        NA      2,286          NA           137                  1,590
Congo,            TB                     7,973,002        4.9     2,963          301          155                    680
(Democratic
Republic of)
Cote d'Ivoire     HIV/AIDS              91,203,150        9.7     6,874          375          156                  1,500
East Timor        Malaria                2,963,723        NA         NA          NA            NA                    NA
Eritrea           Malaria                7,911,425        2.8     7,405          272          157                    960
Ethiopia          HIV/AIDS, TB,        237,568,925        6.4       618          373          168                    660
                  Malaria
Georgia           HIV/AIDS              12,125,644        <.1        NA           72           81                  2,680
Ghana             HIV/AIDS, TB,         29,214,210         3      8,874          281          129                  1,910
                  Malaria
Guinea            HIV/AIDS,             22,029,110        NA      6,469          255          159                  1,930
                  Malaria
Haiti             HIV/AIDS              66,905,477        6.1        12          361          146                  1,470
India             HIV/AIDS,TB          137,975,999        0.8       226          185          124                  2,340
Indonesia         HIV/AIDS, TB,        130,574,740        0.1        82          282          110                  2,830
                  Malaria




                                      Page 56                                                 GAO-03-601 Global Health
                                      Appendix IV
                                      Indicators of Need for Recipient Countries




(Continued From Previous Page)
                                             Amount
                                      requested by HIV/AIDS
                  Diseases being   approved grants rate (%),       Malaria                    Human         Gross National
                  addressed by     for full length of Adults       (Cases/    TB (Cases/ Development    Income per capita
Countrya          Fund grants              programs   (15-49)     100,000)      100,000)       Indexb     (in U.S. dollars)c
Kenya             HIV/AIDS, TB,        176,745,326          15        1,000         417          134                  1,010
                  Malaria
Korea,            TB                     4,891,000         NA           448         176           NA                    NA
(Democratic
Republic of)
Kyrgyz Republic   HIV/AIDS, TB          19,844,373         <.1          NA          130          102                  2,540
Lao People’s      HIV/AIDS, TB,         19,507,845         <.1          755         171          143                  1,540
Democratic        Malaria
Republic
Lesotho           HIV/AIDS, TB          34,312,000          31          NA          542          132                  2,590
Liberia           HIV/AIDS, TB          12,192,274         NA       26,828          271           NA                    NA
Madagascar        HIV/AIDS,              8,335,149         0.3        2,360         236          147                    820
                  Malaria
Malawi            HIV/AIDS,            323,798,722          15      58,139          443          163                    600
                  Malaria
Mali              Malaria                2,592,991         1.7        4,213         261          164                    780
Mauritania        TB, Malaria            5,627,299         NA       11,000          241          152                  1,630
Moldova           HIV/AIDS, TB          11,719,047         0.2          NA          130          105                  2,230
Mongolia          HIV/AIDS, TB           4,727,103         <.1          NA          205          113                  1,760
Mozambique        HIV/AIDS, TB,        155,735,362          13        4,120         407          170                    800
                  Malaria
Myanmar           TB                    17,121,370         NA           254         169          127                    NA
Nepal             HIV/AIDS,             18,840,210         0.5           39         209          142                  1,370
                  Malaria
Nicaragua         HIV/AIDS, TB,         18,865,903         0.2          392          88          118                  2,080
                  Malaria
Nigeria           HIV/AIDS, TB,        137,655,309         5.8          541         301          148                    800
                  Malaria
Pakistan          HIV/AIDS, TB,         21,619,750         0.1           74         177          138                  1,860
                  Malaria
Rwanda            HIV/AIDS, TB          14,641,046         8.9      13,237          381          162                    930
Senegal           HIV/AIDS,             18,857,142         0.5          553         258          154                  1,480
                  Malaria
Sierra Leone      TB                     5,698,557           7        9,318         274          173                    480
Somalia           Malaria               12,886,413           1          102         365           NA                    NA
Sudan             TB, Malaria           76,319,734         2.6      13,553          195          139                  1,520
Tajikistan        HIV                    2,425,245         <.1          295         105          112                  1,090




                                      Page 57                                                    GAO-03-601 Global Health
                                      Appendix IV
                                      Indicators of Need for Recipient Countries




(Continued From Previous Page)
                                             Amount
                                      requested by HIV/AIDS
                  Diseases being   approved grants rate (%),       Malaria                    Human         Gross National
                  addressed by     for full length of Adults       (Cases/    TB (Cases/ Development    Income per capita
Countrya          Fund grants              programs   (15-49)     100,000)      100,000)       Indexb     (in U.S. dollars)c
Tanzania          HIV/AIDS,             28,683,718         7.8        1,293         340          151                    520
                  Malaria
Togo              HIV/AIDS              19,882,903           6        8,512         313          141                  1,410
Uganda            HIV/AIDS, TB,         96,719,638           5        9,305         343          150                  1,210
                  Malaria
Ukraine           HIV/AIDS              92,152,744           1          NA           73           80                  3,700
Vietnam           HIV/AIDS, TB          22,000,000         0.3           95         189          109                  2,000
Yemen             Malaria               11,878,206         0.1      15,202          NA           144                    770
Zambia            HIV/AIDS, TB,        191,967,000        21.5      26,260          495          153                    750
                  Malaria
Zimbabwe          HIV/AIDS,             22,977,500        33.7        9,429         562          128                  2,550
                  Malaria
Lower middle income
Bulgaria          HIV/AIDS              15,711,885         <.1          NA           46           62                  5,560
China             TB, Malaria           54,476,659         0.1            1         103           96                  3,920
Cuba              HIV/AIDS              26,152,827         <.1          NA           15           55                    NA
Dominican         HIV/AIDS              48,484,482         2.5           12         135           94                  5,710
Republic
Ecuador           HIV/AIDS              14,104,108         0.3          683         172           93                  2,910
Egypt, (Arab      TB                     4,032,014         <.1          NA           39          115                  3,670
Republic of)
El Salvador       HIV/AIDS, TB          26,912,923         0.6          NA           67          104                  4,410
Honduras          ALL                   41,119,903         1.6          547          92          116                  2,400
Iran, (Islamic    HIV/AIDS              15,922,855         <.1           33          54           98                  5,910
Republic of)
Jordan            HIV/AIDS               2,483,900         <.1          NA           11           99                  3,950
Kazakhstan        HIV/AIDS              22,360,000         0.1          NA          130           79                  5,490
Morocco           HIV/AIDS               9,238,754         0.1          NA          119          123                  3,450
Namibia           HIV/AIDS, TB,        113,157,021        22.5        2,556         490          122                  6,410
                  Malaria
Peru              HIV/AIDS, TB          50,177,054         0.4          257         228           82                  4,660
Philippines       TB, Malaria           23,267,609         <.1           15         314           77                  4,220
Romania           HIV/AIDS, TB          48,360,586         <.1          NA          130           63                  6,360
Serbia            HIV                    3,575,512         NA           NA          NA            NA                    NA
(Yugoslavia)
South Africa      HIV/AIDS, TB         190,388,018        20.1           83         495          107                  9,160




                                      Page 58                                                    GAO-03-601 Global Health
                                                                    Appendix IV
                                                                    Indicators of Need for Recipient Countries




(Continued From Previous Page)
                                                                        Amount
                                                                 requested by HIV/AIDS
                            Diseases being                    approved grants rate (%),                        Malaria                          Human                            Gross National
                            addressed by                      for full length of Adults                        (Cases/          TB (Cases/ Development                       Income per capita
Countrya                    Fund grants                               programs   (15-49)                      100,000)            100,000)       Indexb                        (in U.S. dollars)c
Sri Lanka                   TB, Malaria                                  14,505,200                 <.1            1,402                     59                      89                          3,460
Swaziland                   HIV/AIDS,                                    56,736,900               33.4                300                  564                     125                           4,600
                            Malaria
Thailand                    HIV/AIDS, TB,                            209,635,201                    1.8               199                  141                       70                          6,320
                            Malaria
Upper middle income
Argentina                   HIV/AIDS                                     28,756,200                 0.7                NA                    55                      34                        12,050
Botswana                    HIV/AIDS                                     18,580,414               38.8             4,467                   702                     126                           7,170
Chile                       HIV/AIDS                                     38,151,562                 0.3                NA                    26                      38                          9,100
Costa Rica                  HIV/AIDS                                      4,202,362                 0.6                 50                   17                      43                          7,980
Croatia                     HIV/AIDS                                      4,945,192                 <.1                NA                    61                      48                          7,960
Estonia                     HIV/AIDS                                     10,246,580                    1               NA                    61                      42                          9,340
Panama                      TB                                              570,000                 1.5                 34                   54                      57                          5,680
Sources: the Fund; Joint U.N. Program on HIV/AIDS, Report of the Global HIV/AIDS Epidemic, 2002; World Health Organization data on malaria cases (data from varying years, based on latest year for which
information available); World Bank, World Development Indicators, 2002; U.N. Development Program, Human Development Report, 2002.



                                                                    Note: “NA” indicates that the information is not available.
                                                                    a
                                                                     Although each country is listed only once, many countries received multiple grants. All grants received
                                                                    have been accounted for when noting disease programs addressed and dollar amount requested by
                                                                    approved programs. This table includes only grants for individual countries. Multicountry grants are not
                                                                    included.
                                                                    b
                                                                     The Human Development Index is reported by the U.N. Development Program. It measures a
                                                                    country’s achievements in terms of life expectancy, education level attained and adjusted real income.
                                                                    c
                                                                        Purchasing Power Parity method.




                                                                    Page 59                                                                                        GAO-03-601 Global Health
Appendix V

Comments from the Global Fund to Fight
AIDS, TB and Malaria                                     Append
                                                              x
                                                              i
                                                              V




              Page 60             GAO-03-601 Global Health
Appendix V
Comments from the Global Fund to Fight
AIDS, TB and Malaria




Page 61                                  GAO-03-601 Global Health
Appendix V
Comments from the Global Fund to Fight
AIDS, TB and Malaria




Page 62                                  GAO-03-601 Global Health
Appendix V
Comments from the Global Fund to Fight
AIDS, TB and Malaria




Page 63                                  GAO-03-601 Global Health
Appendix V
Comments from the Global Fund to Fight
AIDS, TB and Malaria




Page 64                                  GAO-03-601 Global Health
Appendix V
Comments from the Global Fund to Fight
AIDS, TB and Malaria




Page 65                                  GAO-03-601 Global Health
Appendix V
Comments from the Global Fund to Fight
AIDS, TB and Malaria




Page 66                                  GAO-03-601 Global Health
Appendix VI

Joint Comments from the Departments of
Health and Human Services and State, and the
U.S. Agency for International Development                  Appendx
                                                                 iVI




               Page 67              GAO-03-601 Global Health
Appendix VI
Joint Comments from the Departments of
Health and Human Services and State, and
the U.S. Agency for International
Development




Page 68                                    GAO-03-601 Global Health
Appendix VII

GAO Contact and Staff Acknowledgments                                                       Append
                                                                                                 x
                                                                                                 iVI




GAO Contact       Thomas Melito, (202) 512-9601



Staff             In addition to the persons named above, Sharla Draemel, Stacy Edwards,
                  Kay Halpern, Reid Lowe, William McKelligott, Mary Moutsos, and Tom
Acknowledgments   Zingale made key contributions to this report.




(320120)          Page 69                                            GAO-03-601 Global Health
GAO’s Mission            The General Accounting Office, the audit, evaluation and investigative arm of
                         Congress, exists to support Congress in meeting its constitutional responsibilities
                         and to help improve the performance and accountability of the federal government
                         for the American people. GAO examines the use of public funds; evaluates federal
                         programs and policies; and provides analyses, recommendations, and other
                         assistance to help Congress make informed oversight, policy, and funding
                         decisions. GAO’s commitment to good government is reflected in its core values of
                         accountability, integrity, and reliability.


Obtaining Copies of      The fastest and easiest way to obtain copies of GAO documents at no cost is
                         through the Internet. GAO’s Web site (www.gao.gov) contains abstracts and full-
GAO Reports and          text files of current reports and testimony and an expanding archive of older
                         products. The Web site features a search engine to help you locate documents
Testimony                using key words and phrases. You can print these documents in their entirety,
                         including charts and other graphics.
                         Each day, GAO issues a list of newly released reports, testimony, and
                         correspondence. GAO posts this list, known as “Today’s Reports,” on its Web site
                         daily. The list contains links to the full-text document files. To have GAO e-mail this
                         list to you every afternoon, go to www.gao.gov and select “Subscribe to GAO
                         Mailing Lists” under “Order GAO Products” heading.


Order by Mail or Phone   The first copy of each printed report is free. Additional copies are $2 each. A check
                         or money order should be made out to the Superintendent of Documents. GAO
                         also accepts VISA and Mastercard. Orders for 100 or more copies mailed to a single
                         address are discounted 25 percent. Orders should be sent to:
                         U.S. General Accounting Office
                         441 G Street NW, Room LM
                         Washington, D.C. 20548
                         To order by Phone:     Voice: (202) 512-6000
                                                TDD: (202) 512-2537
                                                Fax: (202) 512-6061


To Report Fraud,         Contact:
                         Web site: www.gao.gov/fraudnet/fraudnet.htm
Waste, and Abuse in      E-mail: fraudnet@gao.gov
Federal Programs         Automated answering system: (800) 424-5454 or (202) 512-7470



Public Affairs           Jeff Nelligan, Managing Director, NelliganJ@gao.gov (202) 512-4800
                         U.S. General Accounting Office, 441 G Street NW, Room 7149
                         Washington, D.C. 20548
United States                  Presorted Standard
General Accounting Office      Postage & Fees Paid
Washington, D.C. 20548-0001           GAO
                                 Permit No. GI00
Official Business
Penalty for Private Use $300
Address Service Requested