Order Code RL33396
CRS Report for Congress
Received through the CRS Web
The Global Fund to Fight AIDS,
Tuberculosis, and Malaria:
Progress Report and Issues for Congress
April 25, 2006
Tiaji Salaam-Blyther
Analyst in Foreign Affairs
Foreign Affairs, Defense, and Trade Division
Congressional Research Service ˜ The Library of Congress

---

The Global Fund to Fight AIDS, TB, and Malaria:
Progress Report and Issues for Congress
Summary
The Global Fund to Fight AIDS, Tuberculosis, and Malaria, headquartered in
Geneva, Switzerland, is an independent foundation intended to attract and rapidly
disburse new resources in developing countries for countering the three diseases.
The Fund is a financing vehicle, not a development agency, and its grants are
intended to complement existing efforts rather than replace them.
The origins of the concept of an independent funding mechanism to fight AIDS
and other diseases lie partly in a French proposal made in 1998, in ideas developed
in the 106th Congress, and in recommendations made by U.N. Secretary General Kofi
Annan in April 2001. President Bush made the “founding pledge” of $200 million
for a disease fund in May 2001. The Global Fund was established in January 2002,
following negotiations involving donor and developing country governments, non-
governmental organizations (NGOs), the private sector, and the United Nations.
The Global Fund has approved more than 350 grants totaling nearly $5.2 billion
for projects in 131 countries, of which about $2.1 billion has been disbursed in 127
countries. To date there have been five “rounds” of funding, with the Board
approving proposals in April 2002, January 2003, October 2003, June 2004, and
September 2005. However, in September 2005, due to a lack of available funding
from donors, only a portion of proposals recommended for approval in Round 5 were
officially approved. The remaining tentatively approved proposals received final
approval in December 2005 after additional contributions were made. The Global
Fund will make grants only if it has funds on hand to cover the first two years of the
proposed projects — an approach known as the Comprehensive Funding Policy. The
policy is designed to avoid disruptions to projects due to funding shortages. This is
regarded as particularly important with respect to antiretroviral therapy, since
interruptions in treatment can lead to the emergence of resistant strains of HIV and
to death. Funding for the third through fifth years of the projects is dependent on
grant performance and on new donor contributions.
After deducting the mandated 1% rescission, U.S. congressional appropriators
provided $544.5 million for the Fund in FY2006. The Administration has requested
$300 million for a U.S. contribution to the Global Fund in FY2007. Many supporters
of the Fund propose that the United States provide more than the Administration
request but others contend that a larger contribution could result in less funds for U.S.
bilateral programs. This report discusses the Fund’s progress to date, including U.S.
contributions to the organization and some potential issues for Congress. This report
will be updated as needed. For a comprehensive description of the structure and
functions of the Global Fund, see CRS Report RL31712, The Global Fund to Fight
AIDS, Tuberculosis, and Malaria: Background.

---

Contents
Background . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Progress to Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Projects Funded and Implemented . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Suspended Grants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Ukraine . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Uganda . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Discontinued Grants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
South Africa . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Senegal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Cancelled Grant . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Burma (Myanmar) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Congressional Actions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Issues for Congress . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
33% Statute: A Ceiling or Floor? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Funding Global Fund vs. U.S. Bilateral Programs? . . . . . . . . . . . . . . . . . . . 12
Additional Funds for More Effective Malaria Treatment? . . . . . . . . . . . . . 12
Delay Future Rounds? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
List of Tables
Table 1. Results of Global Fund Grants to Date . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Table 2. Grant Agreements to Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Table 3. Phase II Funding Requirements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Table 4. U.S. Appropriations to the Global Fund . . . . . . . . . . . . . . . . . . . . . . . . . 9
Table 5. Global Fund Financial Needs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Table 6. Total Global Fund Contributions and Pledges . . . . . . . . . . . . . . . . . . . 11

---

The Global Fund to Fight AIDS,
Tuberculosis, and Malaria: Progress Report
and Issues for Congress
Background
In January 2002, the Global Fund to Fight AIDS, Tuberculosis, and Malaria,
was established in Geneva, Switzerland. The Fund provides grants to developing
countries aimed at reducing the number of HIV, tuberculosis (TB), and malaria
infections, as well as the illnesses and deaths that result from such infections. These
three diseases kill approximately 6 million people each year, taking the greatest toll
on sub-Saharan Africa. The Fund is an independent foundation, and its board of
directors consists of representatives of seven donor countries and seven developing
countries. The board also includes one representative from a developed country non-
governmental organization (NGO), a developing country NGO, the private sector, a
contributing private foundation, and the community of people living with HIV/AIDS,
tuberculosis or malaria. The United States holds a permanent Board seat. An
extensive discussion on the structure of the global fund and its funding process can
be found in CRS Report RL31712, The Global Fund to Fight AIDS, Tuberculosis,
and Malaria: Background and Current Issues.
The Global Fund’s efforts are intended to mitigate the impact of AIDS, TB, and
malaria on countries in need. The Fund projects that over five years, the grants it has
approved will have treated 1.8 million HIV-positive people with antiretroviral (ARV)
therapy and 5 million people infected with TB through the Directly Observed
Treatment Short-Course (DOTS), which emphasizes watching the infected patient
take his or her medication every day for several months.1 In addition, the Global
Fund projects that 62 million people will be reached through HIV prevention and
voluntary counseling and testing (VCT) services, over one million orphans will be
supported, and 264 million malaria patients will receive the new artemisinin-based
combination drug treatments (ACT). Artemisinin-based treatments have been found
to be effective in dealing with drug-resistant varieties of malaria. The Fund is also
financing the purchase and distribution of 109 million insecticide-treated bed nets to
prevent the spread of the disease.
1 DOTS is an acronym which describes the internationally-recommended TB control
strategy of Directly Observed Treatment, Short Course.

---

CRS-2
Progress to Date
According to a Global Fund press release, the Fund provides two-thirds of all
international spending on tuberculosis, more than half of all global spending on
malaria, and one quarter of all global spending on HIV/AIDS.2 Table 1 summarizes
the key accomplishments of Global Fund supported grants since 2004.
Table 1. Results of Global Fund Grants to Date
December 2004
December 2005
One Year
Result
(in thousands)
(in thousands)
Increase
HIV/AIDS Treatments
130
384
195%
HIV Voluntary
<1,000
3,900
290%
Counseling and Testing
Tuberculosis Treatments
38
1,000
160%
Malaria Treatments
1,100
3,900
255%
Bed Nets Distributed to
1,350
7,700
470%
Prevent Malaria
Source: The Global Fund, November 30, 2005.
Projects Funded and Implemented
The Global Fund has approved more than 350 grants totaling more than $5
billion for projects in more than 130 countries, of which over $2 billion have been
disbursed in 127 countries. The Global Fund uses a Performance-Based Funding
system to approve grants. Under this system, the Fund only awards the first two years
(Phase I) of funding for approved grants. Additionally, grants receive disbursements
on a quarterly basis only if they are performing well and are meeting previously
agreed upon targets. As the first two years of a grant draw to an end, grants are
subject to a review process. Funding for the third through fifth years (Phase II) of the
projects is dependent upon adequate grant performance in the first two years and the
availability of financing through new contributions. The Global Fund estimates that
85% of grants will be approved for their second phase.
To date there have been five rounds of funding, with the Board approving
proposals in April 2002, January 2003, October 2003, June 2004, and September
2005. However, in September 2005, due to a lack of available funding from donors,
only a portion of proposals recommended for approval in Round 5 were officially
approved. The remaining tentatively approved proposals received final approval in
December 2005 after the Fund obtained additional contributions. The Global Fund
2 Global Fund press release, “Global Fund Grants Deliver Substantial New Results.”
November 30, 2005. [http://www.theglobalfund.org/en/media_center/press/pr_051130.asp]

---

CRS-3
signs grants only if it has funds on hand to cover the first two years of a proposed
project — an approach known as the Comprehensive Funding Policy. The policy is
designed to avoid disruptions to projects due to funding shortages. This is regarded
as particularly important with respect to antiretroviral therapy, since interruptions in
treatment can lead to the emergence of resistant strains of HIV and to death. Funding
for the third through fifth years of approved projects is dependent on project
performance and new contributions to the Global Fund by donors.
Table 2 shows the total value of approved grants that the Fund has committed
itself to supporting. It does not include projected figures for additional rounds or for
grants seeking funding for Phase II. Table 2 illustrates that about $5.17 billion has
been committed to more than 350 grants to date. The bulk of this money, $3.78
billion, is funding Phase I of proposals during Rounds 1-5 (Column 2). An
additional $1.39 billion will be directed to grants that have successfully completed
Phase I and have been approved for Phase II (Column 3).
Table 2. Grant Agreements to Date
(millions)
Grants Approved
Phase I
Phase II
Total
Round 1
$576
$724
$1,300
Round 2
$852
$652
$1,504
Round 3
$615
$17
$632
Round 4
$1,014
-
$1,014
Round 5
$718
-
$718
TOTAL
$3,775
$1,393
$5,168
Source: Global Fund, Progress Summary — March 31, 2006.
Table 3 illustrates the total amount the Fund predicts it will need to fully
support grants approved in Rounds 1-5. The Fund projects that about $4.5 billion
will be needed between 2005 and 2007 to support Phase II of these grants, of which
$1.39 billion has already been committed. The $1.39 billion is represented in the
third column of Table 2 and the second Column of Table 3. Between 2006 and
2007, the Fund anticipates providing $3.3 billion to support grants whose first phase
has already been approved in Rounds 1-5, but whose second phase has not yet been
approved. This $3.3 billion represents the amount of financing the Global Fund
would need for 2006 and 2007 without launching future rounds and only supporting
previously approved grants (Columns 3 and 4).

---

CRS-4
Table 3. Phase II Funding Requirements
(millions)
Phase II Renewals
Total Phase II
Approved
Pending
Pending
2005 and 2006
Approval 2006
Approval 2007
Round 1
$724
$40
$3
$767
Round 2
$652
$327
$39
$1,018
Round 3
$17
$647
$58
$722
Round 4
— $585
$1,093
$1,678
Round 5
— —
$298
$298
TOTAL
$1,393
$1,599
$1,491
$4,483
Source: Global Fund, Progress Summary — March 31, 2006.
Grants Suspended, Discontinued, or Cancelled
The performance-based funding system that the Fund uses enables it to
intermittently adjust support for projects. Grants are reviewed by the Secretariat as
they approach the end of Phase II. The Secretariat issues a recommendation to the
Board about whether or not to approve funding for Phase II. In almost all instances
the Board has followed the Secretariat’s recommendation. There have been a few
instances of divergence. The divergence has led in part to the implementation of a
new policy, approved in December 2006 at the 12th Board Meeting, which outlined
the process that should be followed when the Secretariat and the Board disagree
about whether grants should receive Phase II support.3 To date, the Global Fund has
approved 124 projects for Phase II funding, totaling $1.39 billion. A few grants were
temporarily suspended when accounting inconsistencies were identified. A limited
number of grants were not approved for Phase II funding due to poor performance.
To date, the Global Fund has cancelled one grant, in Burma. This decision sparked
debate among policy analysts about how best to serve humanitarian needs in
politically unstable countries.
Some have expressed concern that the Fund’s oversight mechanisms are not
strong enough to protect against wasteful spending. The U.S. Government
Accountability Office (GAO) released a report in June 2005, which highlighted some
problems associated with the information sources that the Fund uses to make
performance-based funding decisions. The report asserted that the Fund had limited
monitoring and evaluation capabilities, which raised questions about the accuracy of
reported results. GAO also expressed concern that the Fund had not consistently
documented its determinations that recipients’ performance warranted additional
3 Global Fund report on the 12th Board meeting at [http://www.theglobalfund.org/en/files/
boardmeeting12/GF-B12-Decisions.pdf].

---

CRS-5
funding. Additionally, the report found that the Fund had not tracked or publicly
documented denied disbursement requests.4
However, the report did note that the Fund is taking steps to improve grant
performance and grant management. GAO found that the Fund is streamlining
reporting and funding procedures, working with partners to strengthen recipient
capacity, and clarifying guidance for the country coordinating mechanisms (CCMs).
Additionally, the Fund has developed a risk assessment mechanism and early
warning system, called Early Alert and Response System (EARS), which identifies
poorly performing grants.
The following section discusses the circumstances under which some grants
were suspended, cancelled, or discontinued. In some instances, the Fund was able
to restore support to grants once key concerns were resolved. In other cases, grants
were not approved for Phase II funding. Ultimately, Burma remains the only country
where a grant was cancelled. In December 2005, the Global Fund Board approved
a Continuity of Services Policy to ensure that life-extending treatment is continued
through other means in the event that a grant is suspended or cancelled.
Suspended Grants
Ukraine. On January 30, 2004, the Global Fund announced that it had
temporarily withdrawn its grant support in Ukraine. Citing the slow progress of
Fund-backed HIV/AIDS programs, the Fund stated that it would ask “a reliable
organization to take over implementation of the programs for several months, to give
Ukraine the opportunity to address concerns of slow implementation, management,
and governance issues.”5 Nearly a month later, on February 24, 2004, the Fund
announced that the suspension had ended, and that a temporary principal recipient
had been identified. By using the new PR, the Fund argued, the previous problems
could be prevented and the projects could be more effectively implemented.6 It is
anticipated that the Fund will allow Ukraine to resume leading project management
once issues related to “governance, management, and adherence to required business
practices are satisfactorily addressed.”7
Uganda. On August 24, 2005, the Global Fund announced that it had
temporarily suspended all five of its grants to Uganda. Additionally, the Fund
declared that the Ugandan Ministry of Finance would have to establish a new
4 GAO, “The Global Fund to Fight AIDS, TB, and Malaria is Responding to Challenges but
Needs Better Information and Documentation for Performance-Based Funding.” June 2005.
[http://www.gao.gov/new.items/d05639.pdf]
5 Global Fund Press Release, The Global Fund Acts to Secure Results for its Programs in
Ukraine. January 30, 2004. [http://www.theglobalfund.org/en/media_center/press/
pr_040130.asp]
6 Global Fund Press Release, Global Fund Signs Letter of Intent to Relaunch Ukraine
HIV/AIDS Grant. February 24, 2004. [http://www.theglobalfund.org/en/media_center/
press/pr_040224.asp]
7 Ibid.

---

CRS-6
structure that would ensure effective management of the grants before resumption
could be considered. The Fund press release explained that a review undertaken by
PricewaterhouseCoopers revealed serious mismanagement by the Project
Management Unit (PMU) in the Ministry of Health, which was responsible for
overseeing the implementation of Global Fund programs in Uganda. Examples of
“serious mismanagement” included evidence of inappropriate, unexplained or
improperly documented expenses.8 Up to that point the Fund had disbursed some
$45.4 million of the $200 million approved.9 Three months later on November 10,
2005, the Fund announced that it had lifted the suspension on all five grants. An
Aide Memoire was established to restructure management of the grants and
strengthen oversight and governance of Global Fund grants to Uganda.10
Discontinued Grants
South Africa. In December 2005, the Global Fund Board voted not to
continue funding an existing grant for HIV prevention activities in South Africa. The
Board decided that the grant, implemented by an NGO named loveLife, had failed
to sufficiently address weaknesses in its implementation.11 Press accounts quote a
Global Fund representative explaining that it had become difficult to measure how
the loveLife prevention campaign was contributing to the reduction of HIV/AIDS
among young people in South Africa. Additionally, the representative reportedly
stated that the Board had repeatedly requested that loveLife revise its proposals and
address concerns regarding performance, financial and accounting procedures, and
the need for an effective governance structure. A Global Fund spokesman was
quoted as saying that “loveLife is extremely costly, there are programs that have been
very effective, which cost a fraction of what loveLife costs. It would be irresponsible
of the Global Fund to spend almost $40 million without seeing results.”12
LoveLife officials were reportedly surprised that the Global Fund ultimately
decided to discontinue funding the grant, particularly since there were some reported
differences of opinion regarding the matter between the Fund’s Technical Review
Panel, Secretariat, and the Board.13 Additionally, loveLife officials reportedly argued
8 Global Fund press release, “Global fund Suspends Grants to Uganda.” August 24, 2005.
[http://www.theglobalfund.org/en/media_center/press/pr_050824.asp]
9 Kaiser Family Foundation, “Global Fund Temporarily Suspends Five Grants to Uganda
Citing Evidence of Mismanagement.” August 25, 2005. [http://www.kaisernetwork.org/
daily_reports/print_report.cfm?DR_ID=32229&dr_cat=1]
10 Global Fund press release, “Global Fund Lifts Suspension of Uganda Grants.” November
10, 2005. [http://www.theglobalfund.org/en/media_center/press/pr_051110.asp]
11 Global Fund Press Release, “Global Fund Closes Funding Gap.” December 16, 2005.
[http://www.theglobalfund.org/en/media_center/press/pr_051216.asp]
12 UN Integrated Regional Information Networks, “South Africa: Global Fund Withdraws
Support for LoveLife.” December 19, 2005. [http://www.plusnews.org]
13 loveLife officials allege that after reviewing the revised proposal that loveLife submitted,
the TRP recommended that the Board fund the proposal. See loveLife press release,
“Statement by loveLife on the Decision by the Global Fund to Fight HIV/AIDS, TB, and
(continued...)

---

CRS-7
that the decision was politically motivated and influenced by U.S. emphasis on
abstinence in HIV prevention efforts. One press account quoted a loveLife official
as saying, “Obviously the strength of conservative ideologies is spilling over into the
field of HIV and HIV prevention and it has direct impact on programs like
loveLife.”14 According to a loveLife press release, the decision to discontinue
funding the program will substantially curtail South Africa’s efforts to prevent HIV
infections among young people, because the Global Fund’s grant supported one third
of the program’s budget. However, the South African government has reportedly
provided additional funds to the program to close the funding gap, and other donors,
such as the Kaiser Family Foundation, have continued funding loveLife HIV-
prevention efforts.
Senegal. On March 1, 2005, the Global Fund announced that it would not
approve funding for the second phase of Senegal’s malaria project, which was
originally funded in Round 1. A Fund press release indicated that the project “was
found to have systemic issues that resulted in poor performance.”15 Furthermore, the
article underscored that “review of the Senegal grant raised serious concerns” about
the effective use of Global Fund resources. Although the program was discontinued,
Fund officials encouraged Senegal to address the issues that were raised and to apply
for new funds in the future. Ultimately, the Fund approved a grant proposal that
Senegal submitted for malaria projects in Round 4.
Cancelled Grant
Burma (Myanmar). According to a Global Fund press release, after extensive
consultation with the U.N. Development Program (UNDP), the Fund had decided to
terminate its grant agreements with Burma effective August 18, 2005. The Fund
stated that while it was concerned about the extensive humanitarian needs in Burma,
travel restrictions imposed by the country’s government prevented the Fund from
implementing grants “in a way that ensured effective program implementation.”16
According to the Fund, the travel clearance procedures that the Burmese government
instituted in July 2005 would have restricted access to grant implementation areas
from the Principal Recipient (PR), implementing partners, and Global Fund staff.
Additionally, the Fund indicated that new procurement review procedures would
have “prevented implementation of performance-based and time-bound programs in
13 (...continued)
Malaria to Discontinue Funding.” December 21, 2005. [http://www.lovelife.org.za/
corporate/media_room/article.php?uid=805]
14 Quin, Andrew, “S. Africa youth AIDS program faces cash crunch.” January 4, 2006.
Reuters Foundation. [http://www.alertnet.org]
15 Global Fund Press Release, Global Fund Cuts Funding for Malaria Grant. March 1,
2005. [http://www.theglobalfund.org/en/media_center/press/pr_050301.asp]
16 Global Fund Press Release, The Global Fund Terminates Grants to Myanmar. August 19,
2005. [http://www.theglobalfund.org/en/media_center/press/pr_050819.asp] Also see
Global Fund Fact Sheet, Termination of Grants to Myanmar. August 18, 2005.
[http://www.theglobalfund.org/en/media_center/press/pr_050819_factsheet.pdf]

---

CRS-8
the country, breached the government’s commitment to provide unencumbered
access, and frustrated the ability of the PR to carry out its obligations.”
The Global Fund’s decision to discontinue funding projects in Burma has
sparked a larger debate about providing humanitarian assistance in countries that are
politically unstable or governed by dictatorial regimes. Some were disappointed that
the Fund interrupted its assistance, because of the significant humanitarian needs in
the country. BBC has quoted a Burmese official stating that, “the restrictions on aid
workers were only temporary, and ‘do not justify irreversible termination of
grants.’”17 Press accounts state that a U.N. official accused the United States of
pressuring the Global Fund to withdraw its support in Burma.18 Other press stories
cite U.N. officials warning of impending death, as a result of the situation. “Without
exaggeration, people are going to die because of this decision.”19 However, some
have argued that the Burmese government should be held accountable. “It needs to
be recognized who causes suffering in that country. It’s not the Global Fund...It’s the
regime.”20 Furthermore, a Global Fund spokesperson stressed that the interrupted
aid was not a political decision, rather one based on effective project
implementation.21
Press accounts indicate that Burma has garnered support from other countries
and international organizations to continue programs discontinued by the Fund.
Australia is reportedly increasing its aid to Burma by 25%.22 Additionally, the
European Union (EU) announced that it would be increasing its assistance to the
country fourfold, though officials contend that increased aid is not related to the
Global Fund situation.23 Additionally, a group of European-led donors are reportedly
planning to replace the withdrawn Global Fund funds.24 The donors — who initially
included the European Commission, Australia, Britain, the Netherlands, Norway, and
Sweden — want to create an alternative system for funding health programs, while
sticking to the safeguards established by the Global Fund to ensure that the money
does not directly support the military regime and that aid workers are free to travel
the country.
17 BBC News, “Burma urges UN aid fund to stay.” August 23, 2005.
[http://news.bbc.co.uk/]
18 Australian Associated Press, “Australia to step up AIDS assistance to Burma.” December
7, 2005. [http://aap.com.au/]
19 The Miami Herald, “Misery spreads among political stalemate.” December 29, 2005.
[http://www.miami.com/mld/miamiherald/]
20 The Los Angeles Times, “So Much Need, So Little Help for the Deathly Ill in Myanmar.”
December 27, 2005. [http://www.latimes.com/]
21 Ibid.
22 Australian Associated Press, “Australia to step up AIDS assistance to Burma.” December
7, 2005. [http://aap.com.au/]
23 Associated Press, “EU Humanitarian aid to Myanmar increases fourfold.” December 12,
2005. [http://www.ap.org]
24 Agence France Press, “European donors plan to restore AIDS help to Myanmar:
diplomats.” January 24, 2006. [http://www.afp.com/english/home/]

---

CRS-9
Congressional Actions
Some in Congress have argued that the Fund needs to enhance its transparency,
particularly in its financial processes. While others point out that the Fund has
consistently increased on its website the amount and detail of information related to
its funding process. Additionally, advocates argue that the Fund’s ability to
temporarily suspend, and in some cases, discontinue poor-performing grants in an
efficient manner proves that the Fund is an effective funding mechanism. However,
some in Congress would like greater detail about the progress and process of Global
Fund grants. P.L. 109-102, the FY2006 Foreign Operations Appropriations, requires
that 20% of the U.S. Global Fund contribution be withheld from obligation until the
Secretary of State certifies to the Appropriations Committees that the Fund has
undertaken a number of steps to strengthen oversight and spending practices.
However, the act allows the Secretary to waive the requirement if she determines that
a waiver is important to the national interest of the United States.
In spite of these reservations, Congress has consistently provided more to the
Fund than the Administration has requested. At the launching of the five-year $15
billion Emergency Plan for AIDS Relief, the Administration proposed spending $1
billion on the Global Fund. In each fiscal year between 2003 and 2005, the
Administration has requested $200 million for the Global Fund. The request was
increased to $300 million for the first time in the FY2006 budget request. Another
$300 million has been requested for FY2007.
Through FY2006, Congress has provided $2.066 billion for Global Fund
contributions. Table 4 below lists U.S. contributions to the Fund since its inception
in FY2001. The figures in Table 4 include recisions.
Table 4. U.S. Appropriations to the Global Fund
($millions)
FY2001 - FY2002 FY2003 FY2004
FY2005
FY2006
FY2007 FY2001 -
Actual
Actual
Actual
Actual
Enacted Request
FY2006
Foreign
175.0
248.4
397.6
248.0
445.5
200.0
1,514.5
Operations
Labor/HHS
125.0
99.3
149.1
99.2
99.0
100.0
571.6
FY2004
0.0
-87.8
87.8
0.0
0.0
0
Carryover
TOTAL
300.0
347.7
458.9
435.0a
544.5
300.0
2,086.1
Source: Appropriations Legislation
a. According to the Global Fund, the United States only contributed $415 million in FY2005.
Reportedly, the United States withheld a portion of the Funds to support USAID technical
assistance to the Fund and to divest U.S. funds from certain countries in which the Global Fund
operated against U.S. objections.

---

CRS-10
The withdrawal of $87.8 million in FY2004 illustrated in Table 4 above reflects
requirements outlined in P.L.108-25, U.S. Leadership Against HIV/AIDS,
Tuberculosis, and Malaria Act of 2003, which stipulates that U.S. contributions to
the Fund for fiscal years 2004 through 2008 not exceed 33% of contributions from
all sources. P.L. 108-447, FY2005 Consolidated Appropriations, carries over this
amount and adds it to the 2005 contribution, subject to the same 33% limitation.
This issue is explored in the section below.
Issues for Congress
As the Global Fund grows in size and stature, some are debating whether the
current pace at which the Fund is supporting grants should be maintained. A number
of related issues have been raised, including revising the Fund’s strategy for raising
money, basing greater support to the Fund on grant performance, and encouraging
others such as the private sector to increase their contributions. This section will
explore some of the issues that Congress might consider as it decides how much to
provide to the Global Fund in FY2007.
33% Statute: A Ceiling or Floor?
In May 2003, Congress passed P.L. 108-25, U.S. Leadership Against
HIV/AIDS, Tuberculosis, and Malaria Act, which stipulates that U.S. contributions
to the Fund for fiscal years 2004 through 2008 not exceed 33% of contributions from
all sources. U.S. Representatives instituted the contribution limit to encourage
greater global support for the Global Fund. Some supporters of the Fund argue that
the 33% restriction represents the amount the United States should contribute
annually. Others argue that the statute serves as a ceiling and does not commit the
United States to providing 33% of all contributions. On March 16, 2006, the Senate
passed S.Amdt. 3052 to the FY2007 Senate budget resolution, which proposes the
United States donate one-third of all Global Fund contributions and increase the U.S.
FY2007 Global Fund contribution by $566 million, bringing the total to U.S.
contribution to $866 million. The House version does not include similar language.
Table 5. Global Fund Financial Needs
(billions)
2006 Fund
33% of
2007 Fund
33% of 33% of 2006
Round
Financial Need 2006 Financial Need 2007
and 2007
Rounds 1- 4 renewals
$1.8
$0.59
$1.5
$0.50
$1.09
Round 5 appeals and
$0.1
$0.03
$0.0
$0.00
$0.03
treatment continuation
Round 6
$1.1
$0.36
$1.0
$0.33
$0.69
Round 7
$1.0
$0.33
$0.33
Total
$3.0
$0.98
$3.5
$1.16
$2.14
Sources: Global Fund, Monthly Progress Update — March 22, 2006.

---

CRS-11
Some Global Fund advocates have proposed that Congress strike the 33%
restriction from P.L. 108-25. Proponents argue that it is difficult to leverage U.S.
contributions because the United States donates to the Fund according to its fiscal
year, rather than the calendar year, as most other countries do. Supporters of this
argument point to FY2004 when the 33% statute required nearly $88 million to be
withheld. Advocates point out that at the end of the calendar year sufficient funds
were secured to match the U.S. contribution. However, other analysts argue that
additional contributions were made because the United States withheld the money.
Others argue that the 33% mandate should be seen as a “ceiling” rather than a
“floor.” Supporters of this idea assert that if the United States were to base Global
Fund contributions on its share of the global economy, the U.S. contribution share
would be between 20% and 25%, lower than the 33% floor some advocate. Table 6
below shows total U.S. Global Fund contributions to date, which are nearly 30% of
all Global Fund contributions.
Table 6 also illustrates the relatively small amount the private sector has
contributed to the Fund. Since its inception the Fund has struggled to secure support
from the private sector. The Bill & Melinda Gates Foundation was the largest donor
from that sector. As of March 13, 2006, the Gates Foundation provided $150 million
of the $154 million private sector contributions.25 Supporters of the Fund are
encouraged by the launching of a new initiative called Product Red, which aims to
significantly increase the amount of contributions made by the private sector. The
initiative is a branding mechanism which commits companies that use the Product
Red mark to channel a percentage of the profits from that product into the Global
Fund.26
During the FY2007 appropriation process, Congress might consider whether to
meet one-third of the Fund’s outstanding needs, which total about $1 billion for
2006, or to provide some other amount.
Table 6. Total Global Fund Contributions and Pledges
(billions)
Paid to Date % Paid to Date Pledges
% Pledges to Date
United States
$1.43
29.07%
$2.29
26.87%
European Union
$2.47
50.21%
$4.49
52.63%
Other Countries
$0.86
17.56%
$1.59
18.70%
Private Sector
$0.15
3.16%
$0.15
1.80%
Total
$4.91
100.00%
$8.52
100.00%
Source: Global Fund, Pledges and Contributions, March 13, 2006
25 Global Fund. [http://www.theglobalfund.org/en/files/pledges&contributions.xls]
26 See Global Fund press release, “Global Fund Welcomes Product Red.” January 26, 2006.
[http://www.theglobalfund.org/en/media_center/press/pr_060126.asp]

---

CRS-12
Funding Global Fund vs. U.S. Bilateral Programs?
Some have argued that increasing appropriations to the Global Fund is done at
the expense of U.S. bilateral programs. For example, at a FY2005 Senate
Appropriations Committee hearing Ambassador Randall Tobias, Global AIDS
Coordinator, argued that the “incremental difference between what the
Administration requested and what was appropriated to the Fund is money that might
have been available” for use in U.S. bilateral programs.27 At the launching of the
President’s Emergency Plan for AIDS Relief (PEPFAR) in 2003, the Administration
announced that it would seek $1 billion for the Global Fund over the next five years.
Some analysts assumed the President would maintain a $200 million request for the
Global Fund between FY2003-FY2008. However, the request was increased to $300
million for the first time in FY2006 budget. The FY2007 budget request also
reserved $300 million for the Fund.
It has been argued that any amount provided to the Fund greater than $1 billion
over five years would be committed at the expense of bilateral programs. However,
advocates argue that since the Office of the Global AIDS Coordination (OGAC) at
the U.S. Department of State and the Global Fund have strengthened their
coordination mechanisms, support to the Fund enhances rather than detracts from the
effectiveness of bilateral programs. In January 2006, officials from the Global Fund,
the World Bank and OGAC met in Washington, D.C. to discuss project
implementation and coordination in countries where all three partners have
operations.28
During FY2007 appropriations debates, Congress might consider whether to
support the Fund at the requested level or to exceed the President’s request.
Additional Funds for More Effective Malaria Treatment?
Some countries, mostly those in Africa, initially based their budget proposals
on malaria treatments that are outdated and have rising resistance rates. The
commonly used drug, chloroquine, is quickly becoming ineffective in treating those
infected with malaria. Chloroquine costs approximately 10 cents per course of
treatment. However, because it has been used for more than 50 years, resistant
strains are developing, rendering the drug useless in a rising number of cases. Newer
treatments that are more effective, and have no observable resistance are considerably
more expensive. The new drugs called, “artemisinin-based combination therapies”
(ACTs) cost about $2 per treatment course. The challenge is that if countries are to
treat the same number of individuals that were initially anticipated, they would have
to reapply for additional funds.29
27 Senate Appropriations Committee hearing on FY2005 Appropriations, May 18, 2004.
28 Report on the Joint Coordination Meeting on HIV/AIDS. Washington, DC, January 10-
11, 2005. [http://worldbank.org]
29 Interview with Christoph Benn, Director of External Relations for the Global Fund,
February 7, 2006.

---

CRS-13
Global Fund estimates of future needs do not include additional funds that
existing programs might need to provide newer, more effective treatments. Some
argue that the Fund should give those countries wishing to switch to ACTs priority
in future funding, and that it should include those figures in its budget requests.
However, Fund representatives point out that the Fund’s financing mechanism is
flexible, and allows countries to change treatment policies mid-grant on the basis of
drug sensitivity surveillance data. Furthermore, the Fund argued that some African
countries have already switched to ACTs, though it did not specify if the Fund
provided additional funds for the change.30 Advocates for greater support for the
Fund would like Congress to consider the additional financial burden that the switch
to ACTs might put on the Fund.
Delay Future Rounds?
Fund observers have been debating whether the Global Fund should launch
Round 6 at its board meeting in April 2006 or if it should wait to launch the round
at its November meeting. Currently, the Fund does not have enough money to pay
for a new round, due in part to the restrictions of the Comprehensive Funding Policy.
Some would like the Fund to change its Comprehensive Funding Policy, which
prohibits the Board from approving grants that exceed pledges received at the time
of the board meeting, and from signing grant agreements until the pledges are
received at the World Bank. Critics of the Comprehensive Funding Policy also point
out that donors would need to provide more than $3 billion by the end of 2006 if
Round 6 were to be launched in April 2006 and if grants were to be signed in
November 2006, as the Fund plans.
Those who are concerned that the Board might vote to delay launching Round
6 are closely following discussions of the Policy and Strategy Committee (PSC), a
Global Fund Board Subcommittee. The PSC is responsible for exploring some of the
key policy questions facing the Fund, such as what should the optimal size of the
Global Fund be, on what diseases should the Fund focus, what should happen to
grants when they conclude Phase 2, and how best to mobilize resources from donors.
Bill Steiger, Director of the HHS Office of Global Health Affairs, recently replaced
Ambassador Randall Tobias as the chair of the Policy and Strategy Committee (PSC)
and, will lead the PSC as it debates these key issues. Some advocates are concerned
that Bill Steiger might encourage the delay of Round 6, as did his predecessor,
Randall Tobias during discussions on the launching of Round 5. Some analysts
argue that advocates are placing too much emphasis on the role of Bill Steiger, as
neither he nor the PSC can independently determine whether to delay future rounds.
Instead, the decision on when to launch new rounds is determined by the full Board.
Some who support delaying Round 6 argue that a postponed launching might
provide targeted countries more time to augment limited infrastructures and
absorptive capacities. Supporters of this idea point to the slow distribution of funds
in some of the poorest countries. Others assert that some of the Local Funding Agents
30 Liden, Jon and Vinand Nantuyla, “Response to accusations of medical malpractice by
WHO and the Global Fund.” January 31, 2004. The Lancet, Volume 363, January 31,
2004. [http://www.thelancet.com]

---

CRS-14
(LFAs), Principal Recipients (PRs) and CCMs lack the technical competence to
monitor overall performance and instead are focusing almost exclusively on the risks
of corruption. Those who believe that monitoring and evaluation capacities of Fund
supported grants need to be improved assert that the fiscal mismanagement in
Uganda was brought to the Fund’s attention by a whistle blower, not by LFAs or
other Fund monitors.
It has been proposed that an effective compromise might be for the Fund to
issue a Call for Proposals at the April 2006 Board meeting and wait to approve the
grants at the next board meeting in November 2006. Opponents of this idea assert
that if the Fund chooses this option, it will delay the renewal of current grants and the
launching of Phase II. Finally, supporters point out that if the Fund is to launch
Rounds 7 and 8 during 2006 and 2007 at the levels anticipated by the Secretariat, the
Fund’s annual revenue would have to grow by one-third over 2006 levels and reach
over $4 billion in 2007.31 Ultimately, advocates argue that unless contributions
significantly increase, all of the Fund’s resources will be reserved for supporting
grants approved in Rounds 1 through 5, and that future rounds might be
compromised. It has been argued that the decision of when Round 6 will be launched
could be significantly impacted by the amount Congress decides to provide for the
U.S. Global Fund contribution.
31 For more discussion on this issue, see Aidspan, Global Fund Observer Newsletter, Issue
55, March 5, 2006. [http://www.aidspan.org/gfo/archives/newsletter/GFO-Issue-55.pdf]

---