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This is a joint post with Rachel Silverman and Amanda Glassman

Christmas came early this year for the wonkiest of PEPFAR-watchers. Our gift: the preliminary report on the pilot of PEPFAR’s Expenditure Analysis Initiative, an important and exciting move by PEPFAR towards evidence-based decision making and greater transparency.

For the uninitiated, expenditure analysis (EA) is what it sounds like; it provides an account of where money gets spent and on what. Here’s why it could be a game changer: This seemingly simple tool is essential for realizing huge potential gains in both technical and allocative efficiency, two core components of value for money. For PEPFAR to improve the efficiency of its investments, PEPFAR must regularly assess in detail what it is paying for. For example, by tracking the unit costs of service delivery in a specific area, such as testing and counseling in Mozambique, PEPFAR calculated the relative cost-effectiveness of different service delivery models and implementing partners. Using this data, it was able to reallocate resources toward the most efficient delivery strategy (provider-initiated testing and counseling) and to identify and reprogram low-performing grants.

The report is not comprehensive; rather, it provides a curated sample of EA initiatives in six PEPFAR countries. In addition to the analysis itself, the report also provides cases studies of EA’s role in PEPFAR program management. This “sampler” approach makes it difficult to draw any concrete conclusions from the data, and a few shortcomings are evident. For example, prevention classifications may be too aggregated to be useful, and spending data is not clearly related to programmatic information. Moreover, although expenditure is broken down by general cost category or program area, it is not available by target population and whether it reached populations most at-risk (excluding orphans & vulnerable children). Distinguishing between what is delivered (the intervention), and who receives the intervention (what population) is important for tailoring a set of interventions to a country’s epidemic and modes of transmission. In sum, the report is mostly illustrative in its presentation of EA finding, and we hope that further information, data, and analysis (including the standardized EA instrument) will be made public soon.

Nonetheless, the report demonstrates the wide range of potential applications for using EA to improve value for money, which is particularly encouraging given PEPFAR’s plans to institutionalize EA into its routine annual reporting. For example:

  • EA helps PEPFAR to better understand the cost components of “program management” expenses above the facility level in Zambia.
  • Calculations of unit costs for different prevention approaches helps to inform PEPFAR’s portfolio allocations in Uganda.
  • Analysis of expenditures by program area helps PEPFAR to align its funding with South Africa’s National Strategy Plan and to support a future transition of the program to the Government of South Africa.
  • Using EA, PEPFAR identified secondary-care facilities as the most cost-effective venue for the prevention of mother to child transmission (PMTCT) of HIV in Nigeria (see illustration below).

Beyond the substance of this report, we’re pleased to see PEPFAR (openly) embracing evidence-based decision making and adopting a friendlier (though still cautious) attitude toward data transparency, warts and all. Indeed, on this dimension PEPFAR has been slightly better than the Global Fund (through this EA report, along with its release of expenditures by service delivery and country, published here). A critical next step will be to ensure that expenditure tracking among different donors, mainly PEPFAR and the Global Fund, is “harmonized,” or at least consistent and comparable. (As far as we know, the Global Fund has yet to take any public steps to prioritize EA and its vital role in grant management.)

Transparency of expenditure analysis can and should be a constructive endeavor. However, to realize its full potential, it is essential that we adapt the Spiderman philosophy to global health and aid effectiveness: With great transparency comes great responsibility. Transparency and expenditure analysis are both essential tools for improving value for money and maximizing lives saved – a shared goal for PEPFAR, global health advocates, and health economists alike. But despite our advocacy of transparency, we are sympathetic to the tendency among some global health donors to be secretive. No program is perfect, and transparency, by its very nature, invites the world’s judgment. It is easy for critics to score headlines or cheap “gotcha” points by exploiting the least flattering findings. A relative stalwart of transparency, the Global Fund learned this lesson the hard way when the AP sparked a scandal by reporting “astonishing” levels of fraud – which had, of course, been uncovered and made public by the Fund’s own internal controls.

Watching what happened to the Global Fund, other global health donors are even more wary than before. Not surprisingly, PEPFAR leaders are cautious about public scrutiny, and there’s some hint that these considerations are on their minds, even as they gradually acknowledge the broad benefits of a more transparent approach. Earlier this month, in response to a question at the International AIDS Economics Network Pre-Conference (held at CGD), Ambassador Eric Goosby shared his perspective on PEPFAR’s move towards greater transparency. His main gist was that for data transparency to be feasible, there needs to be a certain level of trust established between PEPFAR and the broader global health community. Otherwise, transparency can pose high risks and low rewards for PEPFAR and the millions of people it serves, particularly with funding under constant threat from Congress. For example, the South Africa and Zambia examples show significant spending on “program management” as a portion of unit costs. The category is broad and undefined, and one worries that it might contain essential components of programs. Yet the reported EA hasn’t yet opened up that black box yet, and disclosing this information will raise reasonable questions. For the South African government, further detail is necessary to help them understand what pieces of PEPFAR programs must be funded with public monies. For the US government, it will help us assure that future spending is reported more accurately, and that all activities funded are linked to desired programmatic results.

This report is a first and very welcome step toward greater transparency, and an opportunity to show PEPFAR that transparency pays off. Let’s hope we all use it well.