Performance Based Funding and the Phase 2 Grant Renewal Decision

1. Performance Based Funding and the Phase 2 Grant Renewal Decision March 2004

2. Policy Background The Global Fund’s system for Performance Based Funding was developed in order to: (i) Provide incentives for grantees to focus on results and timely implementation (ii)Early identify opportunities to expand effective efforts and address potential issues (iii) Provide a tool for the CCM’s oversight and monitoring purposes (iv) Free up committed resources from non-performing programs for re-allocation to programs where results can be achieved

3. 2. Global Fund and PR(s) sign Grant Agreement 6. CCM submits Request for Continued Funding 8. PR(s) and Global Fund negotiate and sign Grant Agreement extension 4. PR reports; CCM oversight; LFA verifications; GF performance based disbursements; partner support 18 20-22 0 20 22 16 1. Board approves Proposals 3. PR receives first disbursement; Program start date 5. CCM invited to submit a Request for Continued Funding 7. Phase 2 decision 9. First phase 2 disbursement instructions Overview of the first two years of a grant and the phase 2 performance based renewal process Program month 24 • Extensions to the normal timeframe for phase 2 decisions may be granted for force majeur situations • Phase 2 decisions may be completed earlier in cases of (i) accelerated implementation or (ii) severe exchange rate fluctuations

4. The Global Fund’s performance based funding system needs to be based on: • Full clarity about the Global Fund’s performance criteria for actual results achieved as compared to targets • Appropriate targets for grant performance with baselines included in Grant Agreements • Reporting on actual results as compared to targets prior to the phase 2 decision • Adequate data quality assurances • Transparency of information flows • Dialogue between key stakeholders • Access to appropriate technical capacity strengthening support for grantees to enhance implementation

5. Targets for key performance indicators should be included in the Grant Agreement between a PR and the Global Fund HIV/AIDS TB Malaria HIV/AIDS & TB ‘Coverage’ Condom distribution Identification of infectious cases ITNs TB prophylaxis for PLWHA Prevention Programs for Specific Groups Malaria in pregnancy PMTCT VCT Increased #s trained to deliver a service Palliative care HIV/TB HIV/TB cross referral and diagnosis Care & Support Support for orphans HIV/TB Patient care under DOTS OVC Increased #s service points Key Indicators – clarity for reporting progress ARV Timely detection and quality treatment Prompt effective Anti-malarial treatment ARV Treatment OIs Control of drug resistance Monitoring of drug resistance Increased #s reached Health Systems Strengthening Health Systems Strengthening Health Systems Strengthening Health Systems Strengthening Supportive Environment IEC IEC IEC IEC Procurement and supply management Procurement and supply management Procurement and supply management Procurement and supply management

6. 20 Global Fund decides on continued funding based on review of performance & financial accountability During implementation, PRs provides periodic updates of progress towards targets as a basis for disbursements of grant funds Disbursements linked to program performance and accountability Total amount disbursed to grantee USD Disbursements linked to performance and program needs: cash requirements for one disbursement period (e.g., one quarter) + one additional quarter First disbursement normally based on program requirements for first two quarters Results Program implementation Financial management Time (months) 24 0 Disbursement Requests and Progress Updates from PRs and advice from LFA trigger disbursements Grant agree-ment First disbursement

7. Approved Proposal PR assessment (by LFA) Grant Agreement (PR/GF) Request for Continued Funding The phase 2 grant renewal decision will be based on information received from CCMs, PRs and LFAs CCM PR LFA Time line (months) Board approval 21 0 3 6 9 12 15 18 20 22 24 Phase 2 decision PR Disbursement Requests and Progress Updates Quarterly or semi-annual LFA Disbursement Recommendation and Progress Review PR Fiscal Year Report Timing aligned with PR fiscal year PR annual audit report

8. The Global Fund Secretariat will compile key grant information into Grant Fact Sheets which will be made transparently available* Key Grant Background Information Global Fund actions • Objectives and intended results • Proposal amount • TRP classification Approved CCM Proposal • Overall assessment conclusion • Identified critical weaknesses/capacity gaps • Decision whether to confirm PR • Conditions precedent for disbursements PR assessment (by LFA) • Key indicators with targets • Grant amount Grant Agreement (PR/GF) Key Grant Performance Information PR Disbursement Requests & Progress Updates • Total actual expenditure vs. budget (PR; disbursements to sub-recipients)** • Program progress • Disbursement recommended vs. PR request • LFA rating of PR overall progress** • Conditions precedent to disbursements met? • Financial accountability issues? • Disbursement decisions** • Actions recommended/ required LFA Disbursement Recommendation and Progress Review • Aggregated actual program results vs. targets (coverage indicators) • Successful incorporation of “lessons learned” in program design PR Fiscal Year Report PR annual audit report • Financial accountability issues? * Format under development: ** For each disbursement period and cumulative

9. The CCM’s Request for Continued Funding will include complementary information for the phase 2 decision* • 1. CCM assessment of program performance • Based on the information prepared by the PR(s) (Disbursement Requests and Progress Updates, Fiscal Year Report,Audit Report) and the Grant Fact Sheet sent by the Global Fund, the CCM provides an assessment of progress made, responding to issues raised by the Global Fund and may also comment on its own experiences with Global Fund processes. • 2. Complementary contextual information • A country profile on key indicators related to the three diseases, as relevant for the program, extracted from the country's routine disease surveillance data compared to baselines; • A list of CCM membership and a description of the functioning of the CCM, including partnerships brought about among different constituencies as a result of the program; • A description of linkages between the program and other national initiatives/programs; • Information on the level of and distribution of overall national financial resources to the three diseases and broader purposes related to the program. • 3. Years 3-5 budget, objectives & intended results • The proposed funding period and total amount requested from the Global Fund; • Objectives and performance targets, with appropriate baseline data; • Information on any planned changes in existing implementation arrangements; and • Funding available from other sources for the program. * Format under development

10. PR Reports; LFA verifications Budget, objectives, & intended results from CCM Contextual information from CCM + CCM assessment of program progress + + LFA assessment + + External evaluations & input from partners Input from partners Input from technical partners The Global Fund Secretariat will prepare a Grant Score Card with the key information for the phase 2 decision 1. Grant performance information 3. CCM proposed yrs 3-5 budget and deliverables 2. Contextual information Grant performance rating (A-C) Contextual considerations Budget, objectives & intended results

11. Consequence: Decision categories: 1  Grant committed for phase 2 Go! ? 2 Grant committed conditional upon time-bound actions Conditional go Reprogramming subject to Global Fund review 3 Revised go 4 Grant not committed for phase 2 No go The phase 2 grant renewal decision will fall into one of four categories

12. The phase 2 decision will be based on a performance rating and contextual considerations ?

13. The grant performance rating will be based on actual results as compared to targets in the Grant Agreement Actual results as compared to targets for key coverage indicators* Grant performance rating A1 A2 B1 B2 C1 C2 Exceeding expectations Expected Adequate Inadequate but potential demonstrated Inadequate – no potential demonstrated Unacceptable 3. Number of persons reached with services Targets exceeded (>100%) Targets met or nearly met (80-100%) Significant improvements made (50-80%) Some improvements made (30-50%) Marginal or no improvements made (<30%) Clear break of obligations under Grant Agreement, e.g., mis-management of funds and/or gross incompetence. 2. Number of service centers established/ strengthened If the program has achieved at least significant improvements in terms of numbers of persons reached, the Global Fund does not need to consider lower level indicators for the phase 2 decision Significant improvements made (>30%) Marginal or no improvements made (<30%) 1. Number of persons trained to deliver services Significant improvements made (>30%) Marginal or no improvements made (<30%) * See joint partner M&E toolkit for indicators per disease and service delivery area

14. Contextual considerations The grant performance rating will consider disease trends and impact. In addition, the following types of contextual information will be considered: 1. Major changes in the program supporting environment 2. Significant adverse external influences (force majeur) 3. Systematic weaknesses 4. Financial and program management issues 5. Information that would indicate that a grant was not advancing the Fund’s operating principles to: • Promote broad and inclusive partnerships; • Promote sustainability and national ownership; well as • Provide additional resources • Use the best available technical information

15. Phase 2 grant amount The maximum grant amount for phase 2 equals the amount in the original approved Proposal, following adjustments from TRP clarifications and phase 1 grant negotiations, less the amount disbursed by the Global Fund to PRs at the end of the phase 1 period. The CCM will be encouraged to request a reasonable grant amount based on program realities. The amount requested by a CCM will be reviewed and adjusted for reasonableness as appropriate by the Secretariat assisted by advise from the LFA based on the following considerations: • The usage of funds and performance during phase 1; • Anticipated program realities for phase 2; • The reasonableness of key unit costs for the budget

16. Phase 2 program objectives The program objectives and intended results for phase 2 are expected to be broadly consistent with the original approved Proposal. Reprogramming is encouraged as necessary and appropriate to reflect program realities. The Secretariat will review the CCM;s Request and may request the opinion of the TRP in instances of significant reprogramming. Specific targets for program performance during phase 2 will be agreed between the PR(s) and the Global Fund during the negotiations to extend the Grant Agreement.

17. Phase 2 grant renewals for Rounds 1 and 2 grants The principles and policies for phase 2 grant renewals will be applied also to Rounds 1 and 2 grants. It is recognized that during the Global Funds’ first two years of operation, grantees may have been adversely affected by lack of clarity about Global Fund policies and procedures as these were under development. It is further recognized that grant performance information may not have been as systematically collected as will be the case in the future. Implications for Rounds 1 and 2 grantees: As agreed between the Secretariat and PRs of already signed Rounds 1 and 2 grants, Grant Agreement start dates may be adjusted to reflect program realities. The baseline for this adjustment is the date of first disbursement from the Global Fund. For some Rounds 1 and 2 grants, operational adaptation of the performance rating system for situations of unclear targets and sub-optimal reporting may be required (“back-fitting” of grant agreements).

18. Back up • Performance rating system • Further related work • The Global Fund phase 2 review and decision process

19. Grant performance rating A grant performance rating will be a key component of the phase 2 grant renewal decision. A performance rating from A to C should reflect actual program results as compared to agreed targets. Funding should not be continued unless grantees demonstrate credible potential to reach program targets

20. Fictional example of the grant performance rating: Actual results vs. targets for a HIV/AIDS grant Goal: Reduced adult HIV prevalence from 15% 2002 to 10% by 2005 Service delivery areas* Actual results as % of targets 9200 pregnant women received ARVs PMTCT 65% 7400 persons receiving ARV treatment ARV treatment/ monitoring 75% Performance rating: B1 400 persons received PEP PEP 60% 11 districts with VCT centers VCT 80% 350 teachers trained Youth Education 70% Percent 0 30 50 80 100 * See M&E Toolkit for HIV/AIDS, TB and malaria for an overview of service delivery areas

21. Case study: Indonesia TB program; phase 2 renewal by end Nov. 2004 2001 2002 2003 2004 Case Detection Rate (CDR) Targets  2005 30% 81,000 40% 108,000 50% 132,000 60% 157,000 70% 182,000 Cases  Target 2003: 50%Case Detection Rate in 8 provinces 8 provinces supported by Global Fund Overall results: 85% of targets A2 performance rating

22. Phase 2 decision categories: Advise from LFA 1  Go! Review of CCM Request Decision 2 ? Secretariat Senior Operations Manag- ement Secretariat Portfolio Management and support Conditional go 3 Revised go 4 TRP review Board decision No go Overview of phase 2 grant renewal review and decision process Program month 18-20 Program month: 20-22

23. Further related policy work for the Global Fund • Grant renewals in situations of resource constraints: preparation of Board decisions for the June 2004 meeting • Special considerations for decisions to discontinue grants for programs involving on-going drug treatment: further work before the June 2004 Board meeting • Data quality assurance: further work with partners to be reported to the Board through MEFA • Technical assistance to enhance implementation capacities: further work to be reported to the Board • Board communications