10 years and $27 billion for a new business model

The Global Fund to fight AIDS, TB and Malaria (GFATM) represents a different business model in international health and development aid. Unlike traditional aid agencies, the GFATM does not maintain a direct in-country presence of technical and administrative staff who work directly with counterpart local agencies to develop plans for funding.  The GFATM’s business model basically raises funds and turns these over to local recipients (government ministries, national NGOs, international partners etc.) who have submitted technically and financially feasible proposals during annual funding rounds.

These local recipients set their own targets and basically are given enough rope to succeed or to hang themselves.  The latter appears to have garnered the attention of the international media after several grants have been suspended and words of caution have been directed at others who not only have not achieved their self-set targets but appear to have misappropriated, misused or otherwise ‘lost’ some of their funds. One recent account shows that such loss may be in theft of product, not just straight-forward embezzlement of funds.

Local recipients receive some oversite in terms of both expenditure and achievement of program targets. In theory the local recipients – both Principle Recipients (PRs) who are money managers and Sub-Recipients (SRs) who are program implementers – are screened and approved by a national Country Coordinating Mechanism (CCM). The set of projects in a country are also overseen by a Funds Manager based in Geneva who reviews reports and makes occasional site visits.

There are quarterly progress reports submitted through CCMs to independently contracted Local Fund Agents (LFAs), who in the past were more of accounting firms, but apparently now can also ‘audit’ technical aspects, and ultimately to GFATM itself. After two years (or functionally 18 months) each project is reviewed both finacially and technically and given a ‘Go’, ‘Conditional Go’ or a ‘No Go’ to enter ‘Phase 2.   This exemplifies another basic tenet of of the business model, performance based funding.

The GFATM is a consciously evolving organization and has conducted and contracted various evaluations in order to make decisions about program and organizational directions. Such have included the specific, a CCM assessment that identified the need to ensure these bodies were independent of government (or any other group) as well the general, a series of 5-year evaluations. As a result the GFATM has reconsidered funding processes and is evolving toward more alignment with national disease control strategic plans and less on focused annual funding rounds.

Another example of GFATM decision making based on evidence was the change in PR requirements for proposals. After an evaluation showed that NGO PRs performed generally better than government of international agency PRs, and also after it was found that NGOs better represent the interests of the recipient communities (e.g. people living with AIDS), the GFATM Board decided that all grant proposals should have at least one NGO PR.

In short, the GFATM has shown an ability to learn by actively seeking knowledge of its operations and make changes and monitor those.  Of course the recent reports from the Office of the Inspector General show that this is not an easy process to manage from afar given such a large portfolio.

The calls by some for the US Congress to do its own study of the stituation will hopefully not result in throwing the babies sick and dying from AIDS, TB and malaria, out with the bathwater. The GFATM has shown itself willing and able to change without such dire threats. We can still question whether the Global Fund would change its basic business model and become more than a funding agency.

Other aid partners are often left holding the bill for technical assistance to address needs and gaps in country programs. In theory country recipients can use their GFATM funds to pay for TA, but most prefer to go the guaranteed route of buying the commodities (that have gotten some in trouble). Agencies like WHO, USAID, DfID, Unicef, and the Clinton Foundation, to name a few, have always been willing in the end to cough up their own funds to support the TA that is not paid by the GFATM. This creates an uncomfortable marriage among aid agencies.

So maybe the Global Fund will preserve its business model, but if the Fund cannot or will not have a more active presence on the ground, maybe it should pay its aid partners to do this work, for which they have generously been using their own funds in desparation.

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