Global Fund has suspended grants to the Philippines

Press Release

24 September 2009
GLOBAL FUND SUSPENDS GRANTS TO PHILIPPINES FOUNDATION
Source:

Funding to continue through new principal recipients

Geneva – The Global Fund to Fight AIDS, Tuberculosis and Malaria has suspended all five of its grants to the Tropical Disease Foundation (TDF) in the Philippines after evidence emerged of unauthorized expenditure. TDF’s grants for malaria, tuberculosis and HIV will be transferred to new principal recipients in the country.

An investigation by the Office of the Inspector General revealed that around US$ 1 million out of total disbursements of US$ 85 million were spent on activities beyond the terms of the grant agreement. The Global Fund has demanded repayment of the unauthorized expenditures.

The review demonstrated capacity issues within TDF’s overall financial management but the Global Fund continues to value its technical expertise, particularly in multi-drug resistant tuberculosis.

TDF is a principal recipient for five grants: one for tuberculosis and two each for HIV/AIDS and malaria. Its total grant portfolio amounts to US$ 195,225,660. The suspension means that TDF’s ongoing grants will be transferred to new principal recipients in the country. The Global Fund intends to transfer the grants to new principal recipients based on recommendations from the Country Coordinating Mechanism in the Philippines and expects that normal grant activities can resume quickly.

All necessary measures will be taken to ensure that life-saving treatment and prevention activities financed by the Global Fund will not be disrupted, pending the signing of agreements with the new principal recipients. Currently, there are 636 people on ARV treatment in the Philippines and 811 people being treated for multi-drug resistant tuberculosis. Other grants awarded earlier to the Department of Health and Pilipinas Shell Foundation will not be affected by this suspension.
The Global Fund remains committed to efforts to combat the three diseases in the Philippines and will provide all possible support to enable the quick resumption of full grant-aided activities in the country.


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Tropical Disease Foundation Response to Suspended Global Fund Projects

Press Release
25 September 2009

Source:

TDF as Principal Recipient, Sub-Recipient, and contractor of services, has at all times acted in good faith, basing its actions on its best interpretation of the standard terms and conditions laid out in the grant agreement contracts for The Global Fund to Fight AIDS, Tuberculosis, and Malaria (TGF).

There has been no evidence of any personal gain found in the extensive investigations, as mentioned by Dr. Elmar Vinh-Thomas, TGF Cluster Leader for Asia and the Pacific, in a meeting held with the TDF on 24 September 2009.

TDF’s systems of grant and financial management were evaluated thoroughly by the International Union Against Tuberculosis and Lung Disease and Grant Management Solutions. Reports of these reviews indicated that the systems in place were appropriate.

Over the six years of the Global Fund projects, TDF’s expenditures had been periodically examined, reviewed, and audited by the LFA and external auditors, and eventually submitted by the LFA to TGF. In no instance had the LFA or TGF raised any alleged unauthorized expenditure during examinations of expenditures and assessments of financial management systems, until only recently. This is spawned by policies, rules, and regulations formulated after the expenditures were already incurred and audited. This predicament has been noted and articulated in the Five Year Evaluation Study Area 2 Results in the Global Fund Partner Environment at Global and Country Levels, Global Fund Policies and Guidelines, which states,

“The report found examples of conflicting GF policies and guidelines regarding expected rules in grant oversight and management that contribute to variability in policy operationalization and interpretation . . . ”

These observations reflect what actually happened in TDF’s case. New policies and procedures are being enforced ex post facto, after the fact that an agreement has been signed and despite the presence of an entirety of agreement clause in the standard terms and conditions. In such a situation, the TDF exercised good faith in the interpretation of policies and procedures. TDF exerted its best effort in complying with the new policy, or the interpretation of such policies or procedures to the best of its understanding, with guidance requested from the Global Fund Portfolio Manager.

Instances of conflict of interpretation of GF policies and rules, or lack of awareness of such policies, were never intentional nor with malice on the part of the TDF. All actions were done in good faith. The alleged unauthorized expenditures are actually within the authorization given to TDF, as previously instructed by its Portfolio Managers, that for so long as the objectives and the work plan and overall project budget are not changed, such adjustments do not have to be cleared with the GF.

The TDF has fully cooperated with the Office of the Inspector General during the course of the investigation. The TDF has requested details of findings and be allowed enough time to review the records of the OIG findings, and to reimburse any Global Fund monies that may have been inadvertently utilized. The TDF requested an extension of four weeks beyond September 4, 2009 to reconcile the transactions involved. However, even before this could be completed, a press release was published online at TGF’s official website on 24 September 2009, contrary to TGF’s initial announcement of providing enough time to respond to any allegations.