Global Fund Observer - Aidspan

Global Fund Observer NEWSLETTER

Issue 227: 12 September 2013 GFO is an independent newsletter about the Global Fund. To download Word and PDF versions of this issue, click here.

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CONTENTS OF THIS ISSUE:

1. NEWS: Alliance Ukraine Brokers Deal for Significant Reduction in Cost of HCV Treatment

The cost of a 48-week treatment regimen for hepatitis C has been cut by more than half as a result of an agreement between Alliance Ukraine and the pharmaceutical company MSD. 2. NEWS: Nordic Countries Announce Large Increase in Their Pledge for the Global Fund’s Fourth Replenishment

Sweden, Norway, Finland, Denmark and Iceland have announced a collective pledge of $750 million for the Global Fund’s Fourth replenishment. This is a significant increase over what these countries contributed for 2011–2013. 3. ANNOUNCEMENT: Lauren Gelfand Joins Aidspan as Editor-in-Chief

On 2 September 2013, Lauren Gelfand assumed her new duties as Editor-in-Chief at Aidspan. Lauren brings to Aidspan a range of skills and experiences which will enhance the communications and journalistic content of Aidspan’s work. Within the next few weeks, Lauren will succeed David Garmaise as editor of Global Fund Observer (GFO). 4. NEWS: Funding Approved for Three Interim Applicants and One Renewal

Funding in the amount of up to $8.9 million has been approved for three interim applicants. This brings to 18 the number of interim applicants for which funding has been awarded, out of the 48 invited to apply when the new funding model was launched. A further $6.0 million in renewal funding was approved.

5. NEWS: OIG Identifies Significant Deficiencies in Grant Closure Processes

An inspection of grants in four countries undertaken by the Office of the Inspector General has revealed significant deficiencies in the process. The Secretariat has launched several initiatives to address the problem. 6. NEWS: Major Improvements Needed to Make External Audits More Reliable in Six of 10 Global Fund Regions, OIG Says

The Office of the Inspector General says that external audits of Global Fund grants are not sufficiently reliable in most of the 10 regions it examined. In six of the regions, the OIG said that “major improvements” and needed; in another two, it said that “some improvements” are needed. The Secretariat says that it accepts the findings and is implementing the OIG’s recommendations. 7. NEWS: Contract to HR Services Provider in PNG Not Properly Awarded, OIG Says

The Global Fund is seeking recover overhead fees described as “excessive” paid by a principal recipient in Papua New Guinea. The fees were part of a contract for human resource services that the Office of the Inspector General said was improperly awarded. 8. ANNOUNCEMENT: Report on EECA Harm Reduction Initiative Released

A progress report has been released on the HIV and harm reduction initiative in Eastern Europe and Central Asia, one of the three regional initiatives in the transition phase of the new funding model. See section near the end of this newsletter listing additional articles available on GFO Live.

ARTICLES:

1. NEWS: Alliance Ukraine Brokers Deal for Significant Reduction in Cost of HCV Treatment The International HIV/AIDS Alliance in Ukraine (Alliance Ukraine) says that it has reached an agreement with MSD, one of the world’s leading pharmaceutical producers, to more than halve the cost of a 48-week treatment course for hepatitis C (HCV) for its treatment initiative in Ukraine. MSD is known as Merck in the US and Canada. Alliance Ukraine said in a news release that the price for the course of treatment was reduced from $13,200 to $5,000. It added that the substantial reduction will enable Alliance Ukraine to secure HCV treatment for 100 highly vulnerable patients with HIV/HCV co-infection by purchasing pegylated interferon and ribavirin, two key components of the treatment course.

The first patients will be enrolled into HCV treatment in Ukraine in early November 2013. Alliance Ukraine’s HCV treatment initiative is funded by the Global Fund to Fight AIDS, Tuberculosis and Malaria. The news release said that “this new dramatic reduction in HCV treatment costs presents a real breakthrough and opens the door for hundreds of people who are co-infected with HCV and HIV.” Andriy Klepikov, Alliance Ukraine’s Executive Director, said: “We have managed to overcome the key obstacle when it comes to accessing hepatitis C treatment – the price. This project should now become a catalyst for change in Ukraine and the wider region.” “I’m one of the many Ukrainians for whom this treatment will save life,” said Vlad Deineka, who has been waiting for HCV treatment for more than 10 years. Alliance Ukraine said that there is a dramatic unmet need in HCV treatment, both in Ukraine and globally. It cites the World Health Organisation as saying that HCV kills 350,000 people per year, and that another 150 million have the chronic form of the virus. According to Alliance Ukraine, Ukraine has the highest HCV prevalence in Europe; the number of people infected could be as high as 1.2 million. HCV is called the “hidden epidemic” and high treatment cost has historically been the main reason why national governments and international donors have failed to invest in this public health issue, Alliance Ukraine said. Mr Klepikov said that making HCV available in Ukraine at a substantially lower price is the result of “a partnership, which brings together the international donor community, NGO and private sectors, as well as government and patient organizations in a promising new collaboration.” Under the terms of the new partnership, Alliance Ukraine said, people living with HIV who are coinfected with HCV will be eligible for treatment in six regions of Ukraine: Kyiv, Poltava, Sumy, Vinnitsa, Dnipropetrovsk and Mykolayiv. Local NGOs will provide support for patients. The State Service of Ukraine on HIV/AIDS and Other Socially Dangerous Diseases, and the Ukrainian Center for Socially Dangerous Disease Control, under the Ministry of Health, will provide overall coordination of the programme. Alliance Ukraine said that with the support of the Global Fund, the International HIV/AIDS Alliance, the Open Society Foundation and the International Renaissance Foundation, it has been advocating for lower prices and greater access to HCV treatment since 2011. Alliance Ukraine said that limited competition between the manufacturers of efficient HCV medicines has kept the cost of treatment high. Messages of congratulations poured into Alliance Ukraine when the news became public. Messages were received from sources such as Mark Dybul, Global Fund Executive Director; Anna Shakarishvili, Senior Advisor, U.S. Liaison Office, UNAIDS: former Global Fund Executive Director Michel Kazatchkine; Jeffrey O’Malley, Director of Policy and Strategy at UNICEF; Dr Eliot Ross Albert, Executive Director of the International Network of People Who Use Drugs; Billy Pick of the United States Agency for International Development (USAID); and Daniel Wolfe, of

Open Society Foundations. US Global AIDS Coordinator Eric Goosby wrote: “Congratulations to you and your team on bringing an effective treatment into reach of thousands in need. Again, a tribute to your cumulative contribution to the ability to live for HIV infected communities in the Ukraine. Thank you for your sustained and effective work.” Alliance Ukraine said that the price of government-procured HCV treatment in the Russian Federation and several other countries in the region varies from $12,000 to $17,000 a year. This article was altered after it was first posted on GFO Live to add Global Fund Executive Director Mark Dybul to the list of people who sent congratulatory messages to Alliance Ukraine. [This article was first posted on GFO Live on 11 September 2013.] TOP

________________________________ 2. NEWS: Nordic Countries Announce Large Increase in Their Pledge for the Global Fund’s Fourth Replenishment Five Nordic countries have announced a pledge of $750 million for the Fourth Replenishment period of the Global Fund to Fight AIDS, Tuberculosis and Malaria (2014–2016). The five countries are Sweden, Norway, Finland, Denmark and Iceland. The pledges are subject to confirmation by the parliaments of each country. According to a news release from the Global Fund, this represents an increase of over $150 million over the amounts previously donated. The news release was quoting a joint statement issued on 4 September by the five countries and the US. The statement coincided with a meeting between the leaders of the five countries and US President Barack Obama, hosted by Sweden. The statement commended recent reforms and results achieved by the Global Fund. “The vision and foresight of our Nordic partners is a critical piece of seizing this historic moment to defeat HIV, tuberculosis and malaria,” said Dr. Nafsiah Mboi, Chair of the Board of the Global Fund. “This is terrific leadership. We hope others will be inspired by and join these efforts.” The Global Fund said that it will convene a pledging conference in late 2013. The announcement by Nordic leaders promised that they would “work together to ensure a successful replenishment.” No breakdown of the $750 million figure was provided. The statement that this represents an increase of $150 million implies that the five Nordic countries gave $600 million to the Global Fund for the current replenishment period, 2011–2013. According to the pledges and contributions spreadsheet on the Global Fund website, the five countries pledged $620.5 million for 2011–2013 and contributed 100% of their pledges. This suggests that the $750 million pledge for 2014–2016 constitutes an increase of $129.5 million, or 21%, which is still significant.

The news release said that the contribution would unlock an additional $375 million from the US. The news release did not explain precisely how this would work. The wording of the joint statement was as follows: “This funding will leverage $375 million from the U.S. challenge pledge of $1 for every $2 donated.” According to US law, the US cannot give more than one-third of total contributions to the Global Fund. So, the higher total contributions are, the more room there is for the US contribution. [This article was first posted on GFO Live on 6 September 2013.] TOP

________________________________ 3. ANNOUNCEMENT: Lauren Gelfand Joins Aidspan as Editor-in-Chief Lauren Gelfand takes up the role of Editor-in-Chief at Aidspan from 2nd September 2013. Lauren brings to this role a range of skills and experiences which will enhance the communications and journalistic content of Aidspan’s work. As Editor-in-Chief, Lauren becomes the head of Aidspan’s communications effective immediately. Within the next few weeks, Lauren will succeed David Garmaise as editor of Global Fund Observer (GFO). Aidspan Executive Director Kate Macintyre said: “Aidspan is delighted that Lauren is joining our team, and we look forward to her contribution to Aidspan’s work of watching and interpreting the Global Fund at all levels.” Lauren brings to Aidspan strong writing and communicating skills, including extensive multi-media, training and mentoring skills, as well as classic and non-traditional media production. Among Lauren’s responsibilities at Aidspan will be the mentoring and training of local journalists, researchers and advocacy groups. This mentoring, in partnership with Aidspan’s Outreach Team, will support the organisational goal of expanding the breadth and depth of reporting by increasing the number of GFO local and regional correspondents, as well as by growing the technical and analytical side of the work of Aidspan. “This is an exciting opportunity to help bring the high-level policy decisions at the Global Fund to the grassroots level with accessible and thoughtful reporting,” Lauren said. “It is a chance for us to encourage accountability and transparency at the Global Fund, which will ultimately result in better access to health services to combat AIDS, tuberculosis and malaria worldwide.” Lauren’s formal training includes a BA in Philosophy from the University of Wisconsin-Madison and a MA in Journalism from University of Colorado-Boulder. In recent years, she has been expanding her interest in international public health, pursuing an MSc in Public Health from the London School of Hygiene and Tropical Medicine at the University of

London. Lauren and her family moved to Kenya in 2009, building on an extensive career that has taken her to more than 20 countries in Africa and across Asia. A Canadian citizen by birth, but a world citizen by career, Lauren comes to Aidspan with nearly a decade of experience in journalism including nearly six years at Agence France Presse in North America, West Africa and Asia, participating in the coverage of some of the largest news stories of a generation. Lauren was the Middle East/Africa bureau chief for Jane’s Defence Weekly from 2008–2011. In this job of technical journalism, she wrote and edited news, producing features and analysis from 72 countries while overseeing a network of stringers. At JDW, she focused on developing defence, security and military context for global news events, and she provided evaluation of military action and of procurement strategies. Lauren’s work in enhancing communications within and between organisations includes work as Oxfam GB's communications and advocacy advisor for the 10-country West Africa region. Her public health work has included collaborations with UNICEF, writing and disseminating Kenya's first-ever study of violence against children, which is to serve as the foundation for the government’s Child Protection System. Her work with the International Federation of the Red Cross has helped promote a new approach to disaster management and risk reduction in the face of chronic crises in the Horn of Africa. David Garmaise, the Editor of GFO since mid-2012, will not disappear. After transferring his Editor responsibilities to Lauren, David will concentrate on his “other” job at Aidspan, that of Senior Analyst. David will also continue to write for GFO. Kate Macintyre said: “David’s involvement with GFO extends back almost a decade. Aidspan and the Global Fund wider community owe him an enormous debt of gratitude for his careful, astute journalism, his intense analytical eye and the spirit and sanity with which he cuts through the jargon. I am pleased that he will continue to bring these skills to his work as Senior Analyst.” Lauren can be reached at [email protected]. [This article was first posted on GFO Live on 2 September 2013.] TOP

________________________________ 4. NEWS: Funding Approved for Three Interim Applicants and One Renewal All awards were small The Board of the Global Fund to Fights AIDS, Tuberculosis and Malaria has approved funding in the amount of up to $8.9 million for three interim applicants in the transition phase of the new funding

model (NFM). One applicant was awarded funding for two components. See the table for details. Table: Interim Funding Awards for August 2013 Country

Component

Grant Number

Ceiling ($US million)

Philippines

HIV

PHL-607-G08-H

$3.8

Solomon Islands

TB

SLB-810-G01-T

$0.2

Malaria

ZAM-708-G19-M

$2.0

TB

ZAM-711-G26-T

$3.0

Zambia

TOTAL

$8.9 Note: Total is slightly off due to rounding.

All of the amounts shown in the table are ceilings; the amounts finally committed could be less. The Board also approved incremental funding of up to $6.0 million for the renewal of an HIV grant to Malaysia. In approving the interim and renewal funding, the Board was acting on recommendations from the Secretariat and the Grant Approvals Committee (GAC). This brings to 18 the number of interim applicants for which funding has been awarded. When the NFM was launched on 28 February, the Global Fund said that 48 interim applicants had been invited to apply. More approvals are expected in the coming months. Both the interim and renewal funding were approved under the Global Fund’s new simplified process whereby recommendations for small funding requests for well performing grants are made by the Secretariat and endorsed by the GAC, usually without review by the TRP or the GAC. In the balance of this article, we present a summary of the comments of the Secretariat for each of the funding requests plus, for Malaysia, comments from stakeholders. Philippines

The $3.8 million in interim funding will be added to an existing HIV grant, PHL-607-G08-H, bringing the total for this grant to $21.8 million. The grant will be extended for an additional seven months until 30 June 2015. The Philippines was one of nine countries worldwide where HIV infection rose by greater than 25% between 2001 and 2011, with a shift from heterosexual to male-to-male transmission since 2005. The interim funding is intended to close some gaps in the programme by scaling up prevention coverage and improving the effectiveness of interventions among men who have sex with men (MSM) and persons who inject drugs (PWID). In addition the funding will be used to lower the number of clients lost between HIV testing and enrolment in antiretroviral treatment. HIV prevention activities will be expanded from six sites to 10. Solomon Islands

The $153,086 in interim funding will be added to an existing TB grant, SLB-810-G01-T, bringing

the total for this grant to $6.9 million. The additional funds will be used to increase coverage for HIV testing among TB patients; to do more diagnostic drug susceptibility testing for multiple-drugresistant TB (MDR-TB); and to do systematic TB screening among high risk groups (prisoners, children and diabetic patients). Zambia (malaria)

The $2.0 million in interim funding will be added to an existing malaria grant, ZAM-708-G19-M, bringing the total for this grant to $9.6 million and extending the grant by 18 months to 31 December 2014. A large portion of the additional funding will pay for 4.3 million rapid diagnostic kits, which will significantly reduce the existing gap in Zambia’s malaria programme. Some of the funds will be used to monitor adherence to treatment, and monitor stock levels at health facility and community levels. Zambia (TB)

The $3.0 million in interim funding will be added to an existing TB grant, ZAM-711-G26-T, bringing the total of this grant to $16.2 million. The grant has received funding under the Transitional Funding Mechanism, mainly for the provision of first- and second-line anti-TB drugs. The new funding will be used primarily to: (a) strengthen diagnostic capacity; (b) enhance community systems through training of 100 community-based treatment support workers in high burden TB/HIV provinces; (c) support decentralised programme management for ten provincial TB/HIV supervisors; and (d) provide support to health facilities. Malaysia

The $6.0 million in incremental funding is for the next implementation period of an existing HIV grant, MYS-H-MAC. The focus will be on MSM, PWID and sex workers. Although the prevalence of HIV among MSM is estimated at 12.6%, there were no activities targeting this population during the last implementation period of this grant because there was a lack of civil society organisations delivering preventive services. Based on guidance from the Secretariat’s country team for Malaysia, the CCM proposed a change in implementation strategy to include strengthening HIV prevention programmes among MSM. The starting point will be a mapping exercise to identify entry points for prevention, assess needs to be met by targeted interventions and define appropriate outcome benchmarks. The implementation of those activities may be complicated by the fact that sex between men is illegal in Malaysia. Targeting MSM became one of the three objectives for the next implementation period of this grant. The other two objectives are: (1) to increase the coverage of a package of services for PWIDs, including expanding coverage of safe injection practices from 83% in 2009 to 95% in 2015; and (2) to increase the coverage of a package of services for sex workers (female, transgender and male). The representative of the World Health Organization (WHO) in Malaysia, Graham Harrison, explained the rationale for the second and third objectives: “Malaysia has a concentrated epidemic among PWID and there is a growing trend among sex workers. This explains the need to scale up

coverage of interventions quickly to contain the epidemic.” Dr Harrison thinks the implementation strategy provides a “reasonable balance,” taking into account available resources from the government, the knowledge base of what works in Malaysia for different at-risk groups, and the sustainability of interventions after the Global Fund money will run out. The WHO and civil society members on the CCM expressed confidence about the implementation of the renewed grant. “Although there was a slow start when the grant was first awarded, implementation issues have been resolved and no significant delays are expected to occur during the renewal phase,” said Dr Harrison. Danisha Monish, from the Drugs Intervention Community Malaysia (KOMITED), is more specific: “We have done a great job (rating B1 so far) for Malaysia. Looking at the proposed activities in the next implementation period, where there will be more focus on quality of services instead of quantity, I believe we can achieve the targets with flying colours. And not only that, I am sure the HIV prevalence in Malaysia will decrease, especially in key affected populations – by, for example, introducing voluntary counselling and testing, and methadone maintenance therapy.” Ms Monish has a suggestion to improve the process. Pointing out that CCM meetings have been held only every six months so far, she said that “they should be held quarterly to ensure a better quality of services and also to identify gaps and challenges and to find solutions.” Information for this article was taken from Board Decisions GF-B29-EDP6 and GF-B29-EDP7, and from B29-ER-04, the Report of Secretariat Funding Recommendations for August 2013. These documents are not available on the Global Fund website. Our regional correspondent for South-East Asia, Kerstin Reisdorf, contributed to this article. [This article was first posted on GFO Live on 3 September 2013.] TOP

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5. NEWS: OIG Identifies Significant Deficiencies in Grant Closure Processes Secretariat has taken steps to improve the process The controls related to the Global Fund’s grant closure procedures require major improvement. This is the conclusion of an inspection conducted by the Office of the Inspector General (OIG) into grant closure procedures in 51 grants in four countries: Cameroon, Ghana, Nigeria and Zambia. The Global Fund Secretariat has already taken steps to address the problem. The inspections were done in April–May 2013. A report on the inspections was recently posted on the OIG pages on the Global Fund website. The four countries were selected because they had a large number of grants slated for closure and because they had large cash balances still in country. The

OIG undertook a detailed review of 12 of the grants. In the four countries combined, 51 grants should have been closed by 31 December 2012. The OIG said that at the time of the inspections, 41 of the grants had not yet been closed. Some of the reasons advanced for the delays were: (a) an onerous grant closure process; (b) a lack of prioritisation of grant closure; and (c) the lack of a final decision on recoverable amounts identified in audits and investigations. Of the 12 grants reviewed in detail, only one had been closed within nine months of the grant end date. The inspections identified $4.3 million still held in principal recipient (PR) bank accounts for the 12 grants reviewed in detail. The OIG said that it was not able to determine the total cash balance for these grants because information relating to funds still held by sub-recipients and third parties was not consistently available. The OIG found that in the four countries it inspected, $4.4 million was spent after the grant end dates without approval from the Global Fund Secretariat. Only one of the 12 grants reviewed fully complied with the grant closure procedures, the OIG said. One of the requirements during grant closure – the preparation of a list of fixed assets and pharmaceutical products – was not consistently fulfilled. According to the OIG, the PRs identified this as one of the major road blocks to the grant closure process because it was time consuming and perceived as not adding value. The Secretariat was aware that there were problems with the grant closure process. According to the OIG – and to a letter from Global Fund Executive Director Mark Dybul, which was reproduced in the OIG report – the Secretariat had launched several initiatives at the time of the inspections to resolve some of the problems. The initiatives included the following: 

inclusion of grant closure-related objectives in staff key performance indicators to ensure that the process is prioritised;



identification and de-commitment of funds held in grants closed or under closure; and



action to recover unspent balances at the time of approving the close-out plan instead of waiting for the conclusion of the closure process.

In addition, the Secretariat reported, the Finance “Step-Up” project which aims, among other things, to streamline and automate financial information workflows, procedures, processes and systems, will include the grant closure process. [This article was first posted on GFO Live on 7 September 2013.] TOP

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6. NEWS: Major Improvements Needed to Make External Audits More Reliable in Six of 10 Global Fund Regions, OIG Says Some improvements needed in another two regions Secretariat is already implementing the OIG’s recommendations

The Office of the Inspector General (OIG) says that major improvements are needed in the reliability of external audits of Global Fund grants in six of the 10 regions it examined. This refers to audits carried out by external auditors, not audits conducted by the OIG. All grants are supposed to be audited annually by an external auditor. External audits provide an opinion on the proper use of grant funds and provide input for decision-making on the disbursement of those funds, as well as on the renewal of grants within the Global Fund’s performance-based funding framework. According to the OIG, the Global Fund Secretariat considers the external audit of grants as a cornerstone of its Grant Management Assurance Framework (also known as the Risk Management Framework). The reviews by the OIG, conducted in 2013, evaluated the extent to which the Global Fund can place reliance on the external audits for managing its grants. The reviews encompassed external audits carried out between 2011 and 2013 in 29 countries and on 44 grants. Not all countries or grants in each region were reviewed. The composition of the regions in the OIG reports is based on the organisational structure for managing grants in the Grant Management Division in the Secretariat. The OIG recently published separate reports on the reviews it conducted in each region. These reports are available here. Each of the reports makes reference to a consolidated OIG report on the oversight provided by external audits that the OIG has prepared for the Secretariat. However, at present the OIG does not plan to make the consolidated report public because it concerns internal assurance findings. The OIG told GFO that this decision follows recent changes to its charter and recommendations made by the High-Level Review Panel. Thus, the information in this article is based on a review by Aidspan of all 10 regional reports, and on the contents of a letter from Global Fund Executive Director Mark Dybul which was included in each report. The six regions where the OIG said that major improvements are needed are: High Impact Africa 1, High Impact Africa 2, High Impact Asia, Central Africa, Middle East and North Africa, and Western Africa. In two regions – Southern and Eastern Africa, and Southeast Asia – the OIG said that “some improvement” is needed. In the remaining two regions – Eastern Europe and Central Asia, and Latin America and the Caribbean – the OIG said that the external audits were generally reliable. The High Impact Africa 1 region consists of Democratic Republic of Congo, Cote d’Ivoire, Ghana, Nigeria, Sudan and South Africa. External audits from Cote d’Ivoire, Ghana and Nigeria were included in the review. High Impact Africa 2 involves Ethiopia, Kenya, Mozambique, Tanzania, Uganda, Zambia, Zimbabwe and Zanzibar. External audits from Ethiopia, Mozambique, Tanzania and Zanzibar were

included in the review. The High Impact Asia region is made up of Bangladesh, India, Indonesia, Myanmar, Pakistan and Philippines. External audits from Bangladesh, India and Myanmar were included in the review. Dr Dybul said in his letter that the overall conclusion of the OIG is that existing audit arrangements are not satisfactory, and that existing “controls do not allow the Global Fund to generally rely on the external audit of grant recipients for assurance.” Dr Dybul identified the following findings from the OIG’s consolidated report: 

External audits did not consistently cover key risks relating to the use of grant funds.



Processes to ensure the independence and evaluate the performance of external auditors were not sufficient.



Extensive delays were noted in the submission of audit reports.



Delays were noted in the actions taken by the Secretariat to address concerns identified by external auditors.

In his letter, Dr Dybul cited five recommendations made by the OIG in its consolidated report. They are as follows: 

Implement without delay the three recommendations of the High-Level Review Panel relating to external audit, which include (a) having the Audit and Ethics committee approve minimum standards; (b) establishing a pre-qualified pool of auditors; and (c) developing a protocol for information exchange with supreme audit institutions. (A supreme audit institution provides the highest level of external audit of government bodies in a country.)



Approve external audits before disbursements are made.

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Improve the timeliness of receipt of external audit reports.



Take prompt action when concerns are documented in audit reports of grant recipients.



Determine how best to derive combined assurance from external audits, local fund agents (LFAs), country coordinating mechanisms, other donors and other relevant stakeholders.

Dr Dybul said that the Secretariat agrees with these recommendations and is in the process of implementing them. Dr Dybul added that the Secretariat is strengthening the current guidelines and terms of reference for the external audit of principal and sub-recipients. Dr Dybul said the OIG’s report should be read in the context of the numerous changes that are happening in the Secretariat, including stronger management of LFAs, with a focus on identifying risk and value-added LFA work; the implementation of more comprehensive operational risk management; the application of the new Grant Management Assurance Framework; and a comprehensive redefinition of grant management and finance processes. GFO described the Fund’s Grant Management Assurance Framework in two articles, here and here. [This article was first posted on GFO Live on 6 September 2013.]

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_________________________________ 7. NEWS: Contract to HR Services Provider in PNG Not Properly Awarded, OIG Says Global Fund seeking to recover what the OIG termed “excessive” overhead fees PR denies the allegations

The principal recipient (PR) for a Round 8 malaria grant to Papua New Guinea (PNG) paid a supplier excessive overhead fees as part of a contract that was improperly awarded. This was one of the main findings of an investigation undertaken by the Global Fund’s Office of the Inspector General (OIG). A report of the investigation was recently posted on the OIG pages of the Global Fund website. The contract was for the provision of human resource (HR) services to the PR. The company that provided the HR services is not named in the report. The OIG said that the contract was awarded to a company which had ties to the family of one of the PR’s senior executives. The PR is Rotarians Against Malaria (RAM), a project associated with the Rotary Club of Port Moresby. The main activities of the Round 8 grant are to procure and distribute long-lasting insecticide-treated bed nets (LLINs) to every household in PNG and to train health staff in new diagnostic and treatment protocols. The OIG had conducted an audit of Global Fund grants to PNG in 2011 (see GFO article). The audit findings led to a decision to investigate certain aspects of the grant managed by RAM. The OIG concluded that RAM’s appointment of a company to provide HR services was not done in a competitive and transparent manner, and did not provide a reasonable price for some of the services provided. According to the OIG, the contract with the HR service provider was for $1,227,046, of which $760,935 was for salaries and $473,684 was for overhead. The overhead charges constituted 62.3% of the salary cost. In comparison, the OIG said, another company had submitted a bid of $771,890, of which $671,209 was for salaries and $100,681 was for overhead (15% of the salary cost). In the opinion of the OIG, RAM’s decision to appoint the first company resulted in additional costs of $359,543 to the grant. In a letter attached to the OIG’s report, Global Fund Executive Director Mark Dybul said that the Fund was initiating efforts to recover these funds. In addition, the OIG said, because the family of the chairman of the RAM selection committee for the contract had ties to the company that won the contract, the chairman was in a conflict of interest situation which was not adequately managed. The OIG also investigated RAM’s procurement of LLINs, but found that the procurement complied with all of the requirements of the grant agreement. The OIG said that RAM obtained a very

competitive price from the successful bidder for the LLIN tender. In his letter, Dr Dybul said that in April 2012, the Secretariat told RAM that it would have to retender the HR services contract for Phase 2 of the grant. The contract was duly re-tendered. The original contractor was not barred from re-applying and, in fact, won the new tender. Dr Dybul said that after extensive communication with the PR, the local fund agent (LFA) and the country coordinating mechanism, the Secretariat was satisfied that the re-tender had been conducted properly. Dr Dybul added, “The local fund agent was requested by the Secretariat to provide their opinion on the human resources service fees charged by the original winning bidder for the retendered, new contract, and confirmed that the fees were reasonable for Papua New Guinea.” Reaction from RAM

RAM disagreed with the OIG that the original contract had been improperly awarded. RAM’s detailed comments were contained in an annex to the OIG report. RAM said that the OIG audit review team did not carry out an in-country survey in order to determine the reasonableness of the overhead charges in the original contract. The OIG responded as follows: “The OIG has made a comparison between two bids that met with RAM’s expression of interest. One of the bids was unfairly excluded and the winning bid was more expensive.” When asked to comment on a draft of this article, Ron Sheddon, from the Rotary Club of Port Moresby, said “I do not know what we have to do to convince the investigator for the OIG that he is completely wrong in everything that he says.” Mr Sheddon went on to say that RAM will be consulting its lawyers concerning the OIG’s report “as despite RAM saving the Global Fund millions of dollars on our programme they are not prepared to have a one-on-one to show them that RAM and its principals have not done anything wrong.” [This article was first posted on GFO Live on 6 September 2013.] TOP

_________________________________ 8. ANNOUNCEMENT: Report on EECA Harm Reduction Initiative Released The Eurasian Harm Reduction Network (EHRN) has released a progress report on the regional initiative on HIV and harm reduction in Eastern Europe and Central Asia. This is one of the three regional early applicant initiatives in the transition phase of the new funding model. The report describes work done by EHRN in initiating and completing the regional dialogue process; establishing regional governance structures for the concept note development and for grant implementation oversight; defining the overall concept for the initiative; defining grant implementation strategies such as sub-recipient selection and country eligibility; and preparing a “zero draft” of the regional initiative concept note. The report also documents some lessons learned from the experience to date and presents some

recommendations for the Global Fund concerning the development of regional proposals. The report is entitled "EHRN Regional Initiative on HIV and Harm Reduction for Eastern Europe and Central Asia: First Steps, Processes and Lessons Learned." For more information, please contact Sergey Votyagov or Ivan Varentsov, the focal points at the EHRN Secretariat for the regional application. GFO has written several articles on this initiative, the most recent being here. [This article was first posted on GFO Live on 28 August 2013.] TOP

AVAILABLE ON GFO LIVE: The following articles have been posted on GFO Live on the Aidspan website. Click on the article heading to view the article. These articles may or may not be reproduced in GFO Newsletter. NEWS: New PR for Phase 2 of HIV Prevention Grant in Mali

A new principal recipient, Plan Mali, will implement Phase 2 of an HIV prevention grant in Mali. During Phase 1, the grant was suspended due to evidence that grant funds had been misused. NEWS: Comprehensive Strategy for Phase 2 of Senegal TB Grants

The $11.4 million in renewal funding for two Senegal TB grants will be used to implement a comprehensive programme to fight the disease. TOP

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