CCMs are  to develop and forward grant proposals to the Global Fund, monitor  grant implementation, and advise the Global Fund on the viability of  grants for continued funding after 2 years. According to secretariat officials, grant managers use four sources of  information to determine whether to disburse additional funds to grant  recipients. Recipient progress reports. Recipient expenditure data. Several Factors Affected Grant Performance

According to Global Fund officials and other knowledgeable entities,  recipient countries’ capacity to implement grants was an underlying factor  in grant performance. In addition, principal recipients for the 38 grants as  well as Global Fund and development partner officials frequently cited four  factors associated with challenges or successes in grant performance: (1)  guidance, (2) coordination, (3) planning, and (4) contracting and  procurement. For example, recipients in three countries reported  that they could not meet their targets because they had not received  approved national treatment guidelines. However, several grant recipients reported that, under certain  circumstances, Global Fund guidance allowed them to quickly redirect  funds to meet existing targets. In  addition, although the Global Fund’s stated policy is to disburse funds  based on performance and to operate in a transparent and accountable  manner, we found that the secretariat did not document its reasons for  periodic disbursement decisions during phase 1. Some reports do not  explain why recipients missed targets, and the limited monitoring and  evaluation capabilities of many recipients raise questions about the  accuracy of their reporting. Further, the Global Fund secretariat does not systematically track denied  disbursement requests or publicly document denials. Global Fund Is Taking Several Steps to Refine Grant Management and Performance

The Global Fund’s secretariat is launching a range of initiatives to address  challenges to grant performance and improve the overall management of  grants. Systemwide, the secretariat is (1) reorganizing and strengthening its  units, (2) developing a risk assessment mechanism and early warning  system, (3) streamlining reporting and funding procedures, (4) working  with partners to strengthen recipient capacity, and (5) clarifying guidance  for CCMs. However, the board has not clearly defined the CCMs’ role in  overseeing grant implementation. Recipients we met with in Thailand confirmed that they had received  the toolkit. GAO staff  who made major contributions to this report are listed in appendix V.

Objectives, Scope, and Methodology

In May 2003, the President signed a law directing the Comptroller General  to monitor and evaluate projects supported by the Global Fund. In this report, we (1) describe the Global Fund’s process for  managing grants and disbursing funds, (2) identify factors that have  affected grant performance, (3) review the basis for, and documentation of,  the Global Fund’s performance-based funding, and (4) describe the Global  Fund’s recent refinements for managing grants and improving their  performance. Methodology for Describing the Global Fund’s Process for Managing Grants and Disbursing Funds

To describe the Global Fund’s process for managing grants and disbursing  funds, we reviewed Global Fund documents, including The Global Fund  Operational Policy Manual and related guidance documents; A Force for  Change: The Global Fund at 30 Months; The Global Fund to Fight AIDS,  Tuberculosis and Malaria: Annual Report 2002/2003; and Investing in  the Future: The Global Fund at Three Years. 3). Methodology for Reviewing the Basis for, and Documentation of, the Global Fund’s Performance- Based Funding

To review the basis for, and documentation of, the Global Fund’s  performance-based funding, we examined Global Fund documents— including The Global Fund Operational Policy Manual and related  guidance documents, the dossiers for the 38 grants that had a first  disbursement on or before December 31, 2003, and documents supporting  Global Fund decisions to continue or discontinue funding 25 of 28 grants  that had reached their phase-2 renewal point and been reviewed by the  secretariat as of March 31, 2005.
Why GAO Did This Study

The Global Fund to Fight AIDS, Tuberculosis and Malaria--established as a private foundation in January 2002--is intended to rapidly disburse grants to recipients, including governments and nongovernmental organizations. The Global Fund has signed over 270 grant agreements and disbursed more than $1 billion. Governments provide most of its funding; the United States has provided almost one-third of the $3.7 billion the Global Fund has received. In May 2003, the President signed legislation directing the Comptroller General to monitor and evaluate Global Fund-supported projects. GAO reviewed grants that the Global Fund began disbursing before January 2004. This report (1) describes the Global Fund's process for managing grants and disbursing funds, (2) identifies factors that have affected grant performance, (3) reviews the basis and documentation of performance-based funding, and (4) notes recent refinements of Global Fund processes.

What GAO Found

Global Fund policy is to manage grants in a transparent and accountable manner, disbursing funds to recipients based on their demonstrated performance as measured against agreed-on targets. In implementing this performance-based funding system, Global Fund officials are to periodically assess whether the grant's principal recipient has made sufficient progress to warrant its next disbursement. After 2 years, the Global Fund is to determine whether to continue funding the grant for an additional 3 years. In making an assessment, officials consider several information sources, including the recipient's reports on its performance and expenditures and an independent agent's verification of the recipient's reports. Recipient countries' capacity to implement grants has been an underlying factor in grant performance, according to Global Fund and other knowledgeable officials. These officials, as well as principal recipients, also cited guidance, coordination, planning, and contracting and procurement as factors associated with challenges or successes in grant performance. For example, recipients in three countries reported that they could not meet their targets because they had not received national treatment guidelines. However, several grant recipients reported that, under certain circumstances, Global Fund guidance allowed them to quickly redirect funds, thereby enabling them to meet their targets. GAO found problems associated with the information sources that the Global Fund uses in making performance-based funding decisions. For example, the limited monitoring and evaluation capabilities of many recipients raise questions about the accuracy of their reporting. Moreover, the Global Fund has not consistently documented its determinations that recipients' performance warranted additional funding. For instance, the Global Fund's documentation did not explain its decisions to disburse funds to some recipients who reported that they had met few targets. Further, the Global Fund does not track or publicly document denied disbursement requests. The Global Fund is taking steps to address challenges to grant performance and improve the overall management of grants, including (1) reorganizing and strengthening its staff; (2) developing a risk assessment mechanism and early warning system to identify poorly performing grants; (3) streamlining reporting and funding procedures; (4) working with partners to strengthen recipient capacity; and (5) clarifying certain guidance for the country coordinating mechanism--the entity in each country responsible for developing grant proposals, nominating grant recipients, monitoring grant implementation, and advising the Global Fund on the viability of grants for continued funding. However, the Global Fund has not clearly defined the role of these entities in overseeing grant implementation.