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					Annex 5

Clinic: EARS, GIST and Technical Assistance

There were four handouts for the presentation: a powerpoint presentation on EARS,
GIST and Technical Assistance, a one-page handout on GIST, the EARS letter sent to all
countries from The Global Fund in August 2005, and a list of all questions raised by
conference participants about EARS.

The main discussion topics were:
Support for the concept of EARS
   o Making EARS more systematic
           EARS reviews should be included in all reviews between FPM and PR.
              Identification of challenges should be done more regularly.
   o Bringing EARS down to the national and local levels
           Some countries already have their own form of EARS in place.
           Mongolia PR has monthly meetings with SRs and reviews their
              performance. Some SRs complain about the “shaming” of this approach,
              and the PR is now moving to do private meetings with SRs first, only
              making public statements after SRs fail to improve.
           Cambodia rates SRs with a color-coding system – green for okay, blue to
              indicate some concern, and red to indicate serious concern.
   o Communication
           EARS could be used by NGOs to embarrass PRs by going to the press.
              Information needs to be shared cautiously.
   o EARS format
           Participants preferred the format where all GF grants are on the EARS list,
              not just a certain group identified as problematic. This approach will be
              less stigmatizing. They thought that a list of all grants, and a brief
              description of challenges and TA needs, is the best approach.
           There was a fair amount of concern about the potentially stigmatizing
              effect of the EARS list.
       Participants felt it was important that EARS identify challenges to the CCM as
          well as the PR, although allow that PR should have a certain period of time
          before CCM notified. It is important for CCMs to know about problems
          identified by the GF, as they are responsible for oversight.
GIST (Global Implementation Support Team)
       GIST will be most successful if it builds strong links to “local” GIST- like
          efforts – UN Theme Group and other groups that can work to reso lve
NGOs and Civil Society
       General concerns that NGOs are more often SRs than PRs, and are not getting
          enough TA
         Capacity development needs are very different for NGOs than Ministries of
Technical Assistance
       Just engaging TA is not enough, and doesn’t always solve problems.
       It is hard to get PRs and SRs to properly identify their TA needs. One
          recommendation is forming a technical working group under the CCM
          responsible for evaluating grant performance, and identifying TA needs.
          Many participants supported this idea.
       There should be mechanisms for SRs to go directly to GF/EARS to ask for TA
          if their PR is not being responsive.

Clinic: Legal issues

        The Legal Workshop was conducted as a “question and answer” session, with
most of the questions focused on the roles and responsibilities of the various actors
involved in Global Fund programs. In particular, most of the questions focused on the
legal rights and obligations of the Principal Recipient (PR) vs. the Country Coordinating
Mechanism (CCM) in program implementation and oversight. This summary highlights
a few of the key questions asked in each session. For answers to specific legal questions,
please contact the legal department of the Secretariat at any time through your Fund
Portfolio Manager.

       Many of the questions were answered by introducing the governance model of the
Global Fund with the attached chart. The right side of the chart describes the Proposal
Development and Oversight process, and the left side describes the Grant Administration

       Proposal Development and Oversight Process. During proposal development, and
during Phase 2, the actors on the right side of the chart (the CCM, the TRP, and the
Board) have formal roles, as they determine how the proposal (and the Phase 2
application) is written, reviewed and approved. During program implementation, the
CCM has a role in overseeing implementation to ensure that it meets the original intent of
the proposal. It does not have any formal “legal” rights once the proposal is approved
and Grant implementation begins, though it plays a key role during implementation.

        Grant Administration. Once a proposal is approved by the Board it is passed to
the Global Fund Secretariat for implementation. The Secretariat enters into and
administers the grant agreement with the Principa l Recipient, and the Principal Recipient
enters into grant agreements with any Sub-recipients, and so on. These agreements set
out the legal relationships that govern program implementation. Though members of the
CCM “acknowledge” the final grant agreement, neither the CCM nor any of its members
have any formal legal rights to determine how the program is implemented – these rights
remain with the Global Fund, the Principal Recipient, and its Sub-recipients.
Q.      What then, is the role of the CCM during grant imple mentation? What are
its legal rights?

A.     The legal relationships set out in the grant agreements tell only part of the story.
The CCM is the originator of the proposal, and (assuming it functions well and is
representative of stakeholders in country) is the key body to advise on whether the
program is being implemented consistent with the original proposal.

       How does this work in practice?

        Two ways. First, the Principal Recipient has an obligation under the grant
agreement to send all reports and key program information to the CCM for review at the
same time it sends it to the Global Fund (through the Local Fund Agent). Based on this
information, and other oversight activities undertaken by the CCM and its members, it
has the ability to discuss matters of program implementation with any actor on the Grant
implementation side – the PR, the LFA, or the Global Fund Secretariat. While the CCM
does not have the legal right to intervene in program implementation, the Secretariat may
certainly do so on its behalf (and often does).

        Second, any change to the structure of the program which deviates from the
original proposal (reprogramming) raises questions over whether the Grant program is
following the proposal as submitted by the CCM, reviewed by the Technical Review
Panel, and approved by the Board. The Secretariat is under a “legal” obligation to follow
the direction of the Board and implement the proposal as approved. However, there is
often a need to adjust the program over time due to changing events on the ground.
These changes fall into two categories.

               Minor changes are made (legally) between the PR and the Global Fund
       Secretariat through amendments to the grant agreement or changes in the program
       budget and workplan. Practically, however, changes are initiated by the CCM in
       its oversight role, or by the PR after consultation with the CCM. Though the
       CCM does not have the legal right to approve minor reprogramming changes, it
       often does so as a practical matter as the Global Fund Secretariat and the PR will
       normally consult with the CCM and defer to its judgment to ensure that the
       reprogramming is consistent with the view of stakeholders and consistent with the
       goals of the proposal before it approves the change.

               Major changes are another matter. The Global Fund Secretariat is
       required to implement the proposal as approved by the Board, though the
       Secretariat does have flexibility to approve minor changes without going back to
       the Board for approval. When changes are major enough to call into question
       whether the CCM, the Technical Review Panel (TRP), or the Board would have
       approved the Proposal with the change, however, the Secretariat may need to put
       the question to actors on the right side of the diagram. This is what is referred to
       as “material reprogramming,” and involves a change in the mandate set out under
       the original Board approval. It does require that the Secretariat legally engage the
       TRP to ensure that the major change still meets its technical standards, and as a
       matter of practice before legal approval the Secretariat or the TRP will normally
       defer to the CCM to ensure that the change is consistent with country

Q.   Does the PR have the right to select and remove Sub-recipients, or is it the

A.      The PR holds this legal right, not the CCM. However, this does not mean that
the CCM does not have a role in this process – it just means that the ultimate decision in
these matters rests with the PR. The CCM often recommends Sub-recipients for the
program, and has an expectation that they will become part of program imple mentation.
In many cases, the nominated Sub-recipients may be the most appropriate actors to carry
out the program and may have participated in proposal development. The PR, however,
is solely responsible to the Global Fund for performance of the program. If, following an
assessment of the Sub-recipient, it determines that the Sub-recipient does not have the
capacity to perform its tasks, it has both the right and the obligation to either choose not
to use the proposed Sub-recipient or to ensure that the Sub-recipient either develops the
capacity to implement its portion of the program. Once program implementation has
started, if a Sub-recipient is not performing, or if it breaches its contract with the PR, the
PR has the right and the obligation to take whatever action is necessary to cure the
problem, including removal of the Sub-recipient.

Q.     Can PRs and Sub-recipients sit on the CCM?

A.       Yes. Though the CCM should in all cases have a written plan in place to
manage conflicts of inte rest. There is now a requirement for CCMs to have a written
plan in place to manage conflicts of interest when the CCM chair and the PR are the same
entity. When the PR and Sub-recipients sit on the CCM, however, the plan should also
address the inherent conflict of interest that arises when the CCM has to make decisions
on matters related to the role of the PR and Sub-recipients in program implementation.
For example, PRs and Sub-recipients should not be involved in matters relating to
program budget oversight (particularly administrative costs of the PR or Sub-recipient
entities), decisions on whether to recommend changes in PR or Sub-recipient
involvement…etc. The Global Fund does not mandate how these conflicts must be
managed, as each CCM has unique circumstances. However, it was noted that the
“CCC” of Cambodia was managing its conflict by requiring that all matters of program
oversight are passed through a sub-committee of the CCC, whose members and
procedures are structured to ensure that the PR and the Sub-recipients do not have the
ability to participate decisions affecting their oversight.

Q.     Can the Global Fund provide funds for CCM support?

A.      Yes. The Global Fund Board recently approved the use of grant funds to provide
limited CCM support costs. These funds may be reprogrammed from an existing grant or
included in the budget of a new proposal. Funds are managed just like other program
funds, in that they are passed through the Principal recipient to a Sub-recipient who
provides support to the CCM and must report on its activity under the standard grant
reporting structures (and subject to LFA oversight and verification). A full list of eligible
expenses may be obtained from your Fund Portfolio Manager. It is important to be
aware, however, that before the Secretariat may authorize CCM support costs the CCM
must seek support funds from other potential donors in country and demonstrate to the
Global Fund that this support is not available.

Clinic: Financial Aspects of Grant Management

 1. Budget Formulation and Revision During Implementation
     Key discussion points
       (a) Budgets can change and GF is flexible. All budget changes should be
           capable of proper justification including to the LFA and Secretariat.
       (b) Special procedures apply when there is a material change in the budget. A
           material change in the budget is defined as any change in the budget that
           results in a change in the scope of the programme being funded by the
           Global Fund. A change in scope is defined as follows:
                 - Add a goal, objective or service delivery area;
                 - Drop a goal, objective or service delivery area;
                 - Alter the balance between two or more goals, objectives or service
                      delivery areas

         (c) CCM should approve changes; and changes should be recommended by
             LFA and may sometimes need TRP approval.
         (d) PR needs to conduct careful review and assessment in terms of the impact of
             any change in budget on the scope of the program.
         (e) GF does not provide any threshold for a material change in budget but
             emphasises need for sufficient justification of all budget changes (material
             and immaterial).

 2. Financial Reporting
     Key discussion points
       (a) PR should submit reports on time to avoid delays in disb ursements
       (b) LFA should develop checklist of expectations and share it with PR
       (c) PR should manage the expectations of LFA and GF
       (d) There should be mutual respect for each parties professional judgement e.g.
           questions raised by LFAs should be viewed positively
       (e) PRs should work on improving the quality of reporting by SRs
       (f) Process of reporting should be taken seriously with proper justification and
           supporting documents
       (g) PRs/LFAs/FPMs should communicate before submission of report- discuss
           the requirements in order to improve reporting process
       (h) Agree on communication channels in case of multiple PR’s and SR’s
3. SR Management
    Key discussion points
      (a) PRs are responsible for overseeing SR’s
      (b) LFA’s should review PRs’ controls over SRs
      (c) Generally, PRs should have a plan on the flow of funds to SRs and should
          tailor their oversight to respond to the size of disbursement to SRs
      (d) PRs should extend performance based funding principles to SRs

4. Phase II Budget
   Key discussion points
      (a) CCMs should provide sufficient detailed justification for the additional
          disbursement request to the end of phase 1.
      (b) CCM should provide sufficient detailed justification for using any unspent
          phase 1 funds in phase 2.
      (c) Key considerations in reviewing phase 2 budget include:
                - Performance in Phase I
                - Objectives and targets set for Phase 2
                - Anticipated program realities for Phase 2
                - Reasonableness of key budget assumptions
                - Funding from other sources
      (d) PR recommended that TGF should redesign the form and allow more space
          for the provision of full justification – current form has very limited space.
          Also need for clear communication as regards expectations.

5. Audits
   Key discussion points
      (a) Generally GF requires annual audit of program financial statements
      (b) SWAps – single audit acceptable but GF funded expenditures should be
          clearly identifiable
      (c) UNDP as PR –
                - Annual financial statements certified by comptroller
                - Biennial financial statements externally audited
      (d) UNDP as PR under grants managed under the additional safeguards policy –
          general rule applies
      (e) GF funding forms a substantial proportion of PR’s source of funding – PR
          audit acceptable