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The Global Fund to Fight AIDS, TB and Malaria will host its fourth replenishment meeting this week in Washington, DC where it’s hoping to raise $15 billion to support its work for the next three years.  On the eve of the replenishment, the BBC will air a 30-minute segment on its show Panorama titled “Where’s Our Aid Money Gone” that – judging by the synopsis – will likely take a more critical view of the Global Fund than much of its recent press (see here, here, and here). Here is the teaser from BBC’s site:

Supported by celebrities like Bono and Bill Gates, the Global Fund has spent almost £15 billion fighting AIDS, malaria and tuberculosis. But its inspector general was sacked for 'unsatisfactory' performance after exposing corruption, and reports revealing how aid money went missing have been delayed. Richard Bilton challenges those responsible, and questions the UK government's decision to hand over another £1 billion of taxpayers' money to the Fund this autumn.

I was interviewed for this segment to discuss CGD’s recent report ‘More Health for the Money’, which offers recommendations for how the Global Fund can get more value for money from their investments in health.  The interviewers were particularly interested in a recent report from the Global Fund’s Inspector General (IG) that uncovered evidence of financial misconduct and corruption related to a Global Fund grant in Cambodia.  I couldn’t speak to this particular case, but made some general observations about corruption and international aid more broadly.  

Where’s Our Aid Money Gone?
Monday, December 2
7:30pm (UK); 2:30pm (US)
BBC One

The interview lasted 90 minutes, so only a few of my comments will likely make the half-hour show.  But here are some points that I think are worth highlighting, no matter what ends up in the final version of the show:    

First, corruption and fraud happen.  This isn’t a problem unique to the Global Fund; every public spending program, and every private sector firm, experiences fraud and corruption at some point in time.  As one very experienced participant in a recent CGD workshop on corruption noted, “if you look, you will find.”  The United States’ own Medicare program detected around $40 billion in 2012.

What’s important is that corruption and fraud is detected and dealt with fairly and transparently.  To some extent, that’s what the Global Fund has done.  When the Fund found corruption two years ago, it took action to strengthen its financial oversight and change its procurement processes.  In the recent Cambodia case, the total amount of misused funds was modest ($431,567 out of $86.9 million of expenditures that the IG reviewed), and action has been taken to recover the monies.  However, in Cambodia, the IG was only able to audit 39 percent of expenditures from 2003-2010; the rest was not able to be tracked. Further, it took two years for the findings of the investigation to be published. 

As my colleague Bill Savedoff pointed out two years ago, we still don’t have a way to assess how representative this case of corruption may be.  But the Global Fund’s continued commitment to open investigations and reporting should be praised, not slammed, and improvements should be encouraged.   

Second, part of the explanation for fraud and corruption lies with the incentives implicit and explicit in the relationship between any kind of payer (an aid agency like the Global Fund in this case) and their recipients – economists call this the “principal-agent problem”. 

In past years, the incentives and accountability in the relationship between the Fund, Country Coordinating Mechanisms (CCM) and recipients have been diffuse: performance-based funding didn’t always reward performance; performance itself was defined weakly and measured in an ad hoc manner; CCM had built-in conflicts of interest in their structures and lacked resources to fairly conduct oversight. Taken together, the incentive structure did little to promote accountability for efficiency or results.

The Fund has recently strengthened its fiduciary controls by increasing the frequency and rigor of audits.  This new approach creates stronger incentives for recipients to be more careful about receipts and adhering to agreed budgets, but has also had a chilling effect on spending as recipients worry whether they are using the money “correctly.” And the structural issues around performance, performance measurement and CCM remain challenges to be solved.   

Finally, and perhaps most importantly, the challenges the Global Fund faces – related to corruption, grant management, or otherwise – have solutions.  The international response shouldn’t be to abandon the Global Fund, but rather to insist on reforms to strengthen the institution.  For instance, at CGD we have suggested the Fund strengthen its measurement of results by shifting verification of self-reported data to organizations with the capacity to conduct rigorous and representative evaluations.  We also think the Fund could greatly improve its performance-based financing mechanism by directly linking a portion of funding to results in all of their grants. 

I’m glad the BBC is dedicating 30 minutes of its programming to the Global Fund.  But I hope the message isn’t that the UK taxpayers – or those of any other donor country – should be weary of their government’s investment in the Fund.  After all, AIDS is no longer a death sentence for millions of people in the world largely because of programs supported by the Global Fund (as well as U.S. President’s Emergency Plan for AIDS Relief).   

We aren’t better off without the Global Fund.  We are better off with a better Global Fund.   I hope this is reflected on the BBC program, as well in the pledges at the replenishment meeting on December 3.  And most importantly, I hope this is reflected in greater progress against AIDS, TB and malaria in the months to come as we begin to see the results of recent Global Fund reforms.  I’ll be watching all three to find out.