The Global Fund’s 32nd Board Meeting – Montreux, Switzerland, November 20-21, 2014

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Introduction

The Global Fund to Fight AIDS, Tuberculosis and Malaria held its 32nd Board Meeting on November 20-21, 2014, in Montreux, Switzerland. Nafsiah Mboi of Indonesia and Mireille Guigaz of France, the Chair and Vice Chair of the Board, respectively, presided over the meeting. The Board deliberated on a number of decision points including a proposed change in the policy regarding financial contributions for specific countries, regions or disease components. It is anticipated that this approved decision will open up the donor pool to a number of high net worth individuals from Global Fund implementing countries such as Indonesia, South Africa and Vietnam.

The Board approved the following decision points during the 32nd Board Meeting:

  • Approval of the 2015 Corporate Work Plan, Budget Narrative and Operating Expenses Budget;
  • Reporting on Status of Recoveries;
  • Approval of the Governance Plan for Impact;
  • Privileges and Immunities;
  • Global Fund Financing of Hepatitis C Treatment;
  • Market Dynamics Oversight;
  • Ethics and Integrity Initiative: First Stage Policy Proposals;
  • Approval of the Global Fund Corporate Key Performance Indicators Framework 2014-2016;
  • Applying Risk Differentiation; and
  • Approval of the Amended and Restated Global Fund Policy on Restricted Financial Contributions.

Executive Director’s Opening Statement

Dr. Mark Dybul, Executive Director of the Global Fund, thanked the Board for its continued support of the Global Fund’s New Funding Model, which after one year of implementation is now the Global Fund’s “funding model.” Following the most recent replenishment in December 2013, the Global Fund, as of the start of the 32nd Board Meeting, has raised $12.32 billion for the 2014 – 2016 replenishment period.

Dr. Dybul noted the importance of increasing domestic financing for health in implementing countries. This financing will help ensure program sustainability as implementing countries move along the development spectrum and transition from Global Fund support. To date through the concept note development process, countries have committed $2.8 billion in domestic financing for 2015 – 2017, which is a 62 percent increase from the 2012 – 2014 grant period. The Global Fund anticipates that domestic financing commitments during 2015 – 2017 will increase as additional concept notes are submitted and approved.

Dr. Dybul also highlighted the Global Fund’s Procurement 4 Impact (P4i) initiative to reduce costs through procurement reform and more efficient and effective supply chain management. The P4i initiative has resulted in $272 million in savings on the purchase of commodities over the past 12 months, an increase in pooled procurement from $300 million to $1.2 billion, and an improvement in monthly on-time delivery of commodities from 38 to 68 percent over the past six months.

Dr. Dybul included in his remarks three key questions to the Board for consideration during the 32nd Board Meeting: What will the world look like in 15 years? What is the role of development and global health in that world? What, if anything, is the role of the Global Fund in that world?

Adoption of the 2015 Operation Budget and Work Plan

The Board heard from Daniel Camus, the chief financial officer at the Global Fund, who outlined the Global Fund Executive Committee’s priorities for 2015. The priorities focus on the full implementation of the grant making and grant signing stages of the funding model, improving efficiencies across areas such as procurement and governance, and preparing for the next replenishment.

The Board approved a 2015 operational budget of $299.8 million, which is slightly lower than the $300 million projected funding allocation. The 2015 budget includes $16.4 million for the Office of the Inspector General. The Board, through the Secretariat, will continue to work on mitigating the budget exposure to foreign-exchange rate volatility and include measures taken in the reporting to the Global Fund’s Finance and Operational Finance Committee (FOPC).

Office of the Inspector General (OIG) Update / Reporting on Status of Recoveries

Inspector General (IG) Martin O’Malley provided the Board with an update on the status of the Office of the Inspector General (OIG) and operational improvements that the OIG has implemented over the last year. The OIG is on track to be fully staffed in 2015. As of October 2014, the OIG had 40 staff onboard and five more joining before the end of the year, which is just three staff persons short of the 48 budgeted OIG positions. The OIG is working to clear the backlog of “legacy cases” that date back to 2009-2012 timeframe. To date, the OIG has published 11 audits and/or investigations of which seven are considered “legacy cases.” The OIG anticipates to publish five additional reports by the end of the year.

On the issue of losses and recoveries, the OIG informed the Board that of the amounts audited or investigated by the OIG, only 1.8 percent has been deemed to be misused. Of the funds determined to have been misused, 54 percent has been recovered either in cash or committed in writing from the implementing partner. The Board, as part of its commitment to transparency and the independence of the OIG, approved a decision point on the issue of reporting on losses and recoveries. The Board decided to assign the Secretariat with the sole responsibility of preparing twice-yearly reports on losses and recoveries for submission to the Board. Previously, such reporting had been a joint effort by the Secretariat and the OIG.

IG O’Malley will be leaving the Global Fund at the end of January 2015. In September 2014, the Board approved the establishment of a seven-member ad hoc nominations committee that included representatives from the World Bank and the U.S. Government. The ad hoc nominations committee then hired a consultancy firm, Russell Reynolds Associates, to assist in conducting the search and developing a short-list of three candidates for the Board’s consideration. The selection process for the new IG is on track to be voted on by the Board via e-mail from December 15 – 18, 2014.

The Global Fund Governance Plan for Impact

The Board considered and approved a series of governance reforms proposed by the Ad Hoc Working Group on Governance (WGG). The WGG was established by the Board in March 2014 “to identify and recommend for Board consideration possible changes in the Global Fund governance system with the intention of improving efficiency, effectiveness, unity and equity in conduct and management of the affairs of the Global Fund Board and its committees, in line with the mission, needs and work of the Global Fund.” The Board approved a plan for the finalization of an enhanced governance structure that will be presented at the November 2015 Board meeting. The WGG recommends that the enhanced governance structure be comprised of the Board, a Coordinating Group and three standing committees: i) Audit and Finance; ii) Ethics and Governance; and iii) Strategy and Operations. A Transitional Governance Committee will be established for the duration of the current committee terms and will be responsible for overseeing key governance functions, developing a “performance assessment framework,” finalizing the enhanced governance structure, and creating key structures of a comprehensive governance framework for Board approval. The Governance Plan for Impact also recommended that the Board approve three-year Board leadership terms that would include a mid-term performance assessment.

Privileges and Immunities

The absence of privileges and immunities exposes the Global Fund to a variety of risks and may hinder the ability of the fund to:

  • Protect and maximize the impact of Global Fund resources;
  • Deliver life-saving commodities in a timely and efficient manner;
  • Conduct safe field activities; and
  • Ensure transparency and oversight over grants.

The Board acknowledged the abovementioned risks and requested that the Secretariat dedicate the necessary resources to obtaining privileges and immunities for the Global Fund. The Secretariat, through the FOPC and Audit and Ethics Committee (AEC), will jointly oversee the acquisition of privileges and immunities and report to the Board annually on implementing and donor countries that have not provided such protections to the Global Fund.

Global Fund Financing of Hepatitis C Treatment

The Global Fund has previously provided limited support for the treatment of Hepatitis C under guidance received from the independent Technical Review Panel (TRP) tasked with analyzing all funding applications submitted to the Global Fund. However, the Board has not deliberated on the issue of funding for the treatment of Hepatitis C or other co-infections/co-morbidities of the three diseases. The Strategy, Investment and Impact Committee (SIIC) is in the process of developing recommendations for Board consideration on the issue of the Global Fund’s role in funding treatment for co-infections/co-morbidities of HIV/AIDS, tuberculosis and malaria. The SIIC’s recommendations will be presented for consideration of the Board at its March 2015 meeting. At the 32nd Board Meeting an interim measure was approved to allow for the treatment of Hepatitis C where there is a currently approved budget for such treatment within an existing Global Fund grant.

Market Dynamics Oversight

Since 2011, the Global Fund has been playing a greater role in shaping the market for health products that the fund purchases through its grants. The Global Fund’s current market shaping strategy focuses on the following four key objectives:

  • Accelerating the introduction and maturation of new, more cost-effective products;
  • Ensure recipients procure the most cost-effective, WHO-recommended health products or regimens that meet the Global Fund quality assurance policies;
  • Strengthen countries’ capacity to implement strategic procurement practices; and
  • Ensure the continued availability, affordability, and innovation of products through multiple approaches, including for those for which there are not currently sustainable market conditions.

The Market Dynamics Advisor Group (MDAG) was created in 2011 to advise the Global Fund on policies and initiatives to improve the Global Fund’s ability to shape markets of key health products to optimize price, quality, design, and sustainable supply. In 2013, the SIIC requested a review of the MDAG by the OIG. The OIG found that the MDAG was not performing optimally.

Based on the recommendations of the SIIC and the FOPC, the Board decided to dissolve the MDAG and divided the MDAG’s responsibilities between the SIIC and FOPC. Specifically, the SIIC will be responsible for overseeing strategic considerations with respect to market dynamics matters, and the FOPC will be responsible for overseeing financial and operational matters with respect to sourcing and procurement initiatives.

Ethics and Integrity Initiative: First Stage Policy Proposals

A review of the Global Fund’s ethical environment conducted by the AEC concluded the following: i) the organization’s ethics-related documentation is limited; ii) there is only basic awareness of ethics within the organization; and iii) staff are not fully aware of the value of ethics and integrity. Under the guidance provided by the Ethics Steering Committee and the AEC, a series of proposals intended to strengthen the ethical foundations of the Global Fund were submitted to the Board for discussion. The proposals are: i) the Ethics and Integrity Framework; ii) the Creation of a Dedicated Ethics Function led by an Ethics Officer; and iii) principles for a Code of Ethical Conduct for Governance Officials.

Approval of the Global Fund Corporate Key Performance Indicators Framework 2014-2016

In November 2013, the 30th Board Meeting approved the Corporate Key Performance Indicator (KPI) Framework for 2014-2016. A framework of 16 indicators was developed in consultation with key partners such as WHO, UNAIDS, PEPFAR, PMI, the World Bank, and other donors, civil society and academia. Definitions, baselines and performance targets for a majority of the indicators were developed and approved by the FOPC and the SIIC – the Human Rights Protection and Quality of Management & Leadership indicators are still being finalized. During the 32nd Board Meeting, the Board approved the updated KPI framework, currently available performance targets for 2015, and the plan to present the remaining 2015 performance targets for approval at the 33rd Board Meeting.

Applying Risk Differentiation

The Board approved, based on the recommendation of the FOPC, a new Risk Management Policy that will replace the Risk Management Framework adopted by the Board in 2009. The Risk Management Policy establishes thresholds for differentiation in risk management, as well as the upper and lower limits for the Corporate KPIs that will measure the overall level of risk in a grant portfolio.

Approval of the Amended and Restated Global Fund Policy on Restricted Financial Contributions

Under the existing Global Fund Policy on Restricted Financial Contributions (PRFC), a grant that receives such funding cannot go toward a “new area or activity.” This means that restricted funding would not increase the ceiling of a Board-approved grant in a country, rather it would be added to the general pool of Global Fund resources to support other Board-approved activities. The shift from a rounds-based funding model to an allocation-based funding model has resulted in funding applications to include unfunded quality demands (UQDs) that are prioritized until additional funding comes available. Based on the recommendations of the FOPC, the Board approved amendments to the PRFC to allow for contributions to be used for specific UQDs in a country. This decision could potentially open the door for donations from high net worth individuals, businesses and foundations with specific geographic and/or disease interest.

Conclusion

In conclusion, Board Chair Nafsiah Mboi reviewed the Global Fund Board calendar for 2015. The 33rd Board Meeting will be held from March 31 – April 1, 2015, in Geneva, Switzerland, followed by the 34th Board Meeting from November 16 – 17, 2015, in a location to be determined. The process for selecting the next Chair and Vice Chair of the Global Fund Board will begin in January 2015 and the formal appointment will take place on April 1, 2015.