Global fund review: timing of Round 6 still unclear

Bernard Rivers,

Many potential applicants to the Global Fund, and the Secretariat itself, are hoping that the Round 6 Call for Proposals will be issued in April, with grants approved in November.  However, it is far from certain that this will be the case.  The problem is that at present, there is no money to pay for Round 6.  There is thus a real chance that Round 6 grants will not be approved until well into 2007, or even later.  Furthermore, if the Fund is to be able to launch the three new Rounds that the Secretariat desires for this year plus next, the Fund’s annual revenue will have to double this year, and then grow by a further third in 2007.

Another problem is that a significant proportion of Round 6 proposals will consist of requests to extend Round 1-5 grants that are coming to the end of their five-year term.  This means that if the Fund’s revenue does not increase significantly, some CCMs wanting to submit proposals for truly new grant activities, rather than for continuation of grant activities previously funded under earlier Global Fund grants, may have to wait years before their proposals can be approved.

This is not the first time the Fund has been in such a situation.  During the build-up to Rounds 4 and 5, there were doubts as to whether there would be enough money to pay for the Round.  With Round 5, what saved the day was three factors: Some grants from earlier rounds were running late, so Phase 2 costs for those grants were incurred later than expected; actual approval of Round 5 grants was spread over two board meetings, as more money came in; and some donors moved pledges forward from a later year to an earlier year.  All these factors might help again with Round 6; but the situation is more acute than it was with Round 5.

Round 6, like all previous rounds, can only be launched after the board has made a decision to issue a Call for Proposals.  And the grants can only be approved after the board has met six or more months later to respond to the recommendations of the Technical Review Panel.

During 2006, the Fund will only have two board meetings, in late April and early November.  Although there are no rules preventing the board from agreeing in April to issue a Call for Proposals, there are severe restrictions regarding the value of grants that can actually be approved at the following board meeting.  Specifically, the Fund’s Comprehensive Funding Policy currently requires that the dollar value of grants approved must be no more than will be available by the end of the year, based on uncommitted pledges received at the time of the board meeting.  To drive this point home, the Fund also requires that the entire cost of the first two years of a grant must be put in the bank before the grant agreement can actually be signed.

Table 1 shows that based on current pledges, plus certain assumptions about forthcoming pledges from the US and Japan, there will be no money (in fact, minus $21 million) at the end of 2006 to pay for Round 6, and almost no money ($29 m.) at the end of 2007.  This is because the Fund has committed to giving first priority to paying for Phase 2 (Years 3-5) of all grants from earlier rounds.

One factor in this is that Japan, having pledged last year to give the Fund $500 m. “in the coming years” (which was generally assumed to mean $250 m. in 2006 and the same in 2007) has now said that its 2006 contribution will be only $130 m., without specifying how much it will provide in 2007.  This cutback for 2006 certainly hurts, but reversing it would by no means solve the Round 6 problem.

Table 1: Global Fund Revenue Currently Available for Round 6 (US$ million)

Global Fund Revenue 2006 2007
Left over from prior year 108 -21
Pledges, less administrative costs 1,724 1,565
Total Revenue 1,832 1,544
Global Fund Costs from Rounds 1-5 2006 2007
Residual costs from Phase 1 of Rounds 1-5 96 0
Phase 2 of Rounds 1-5 1,757 1,515
Total Costs 1,853 1,515
Thus: Cash at end of year that is available for Round 6 and later -21 29

Note: This table is based primarily on information provided at the Fund’s web site, plus clarifications received from the Secretariat.  In addition, it assumes that the US pledge for 2006 will eventually be $500 m., rather than the $300 m. currently proposed by the President.  (The US pledge has always increased from the President’s original proposal to the amount finally agreed by Congress.)  It also assumes that Japan’s $500 m. pledge will be paid out $130 m. in 2006 plus $370 m. in 2007.  The Phase 1 2006 cost covers Round 5 appeals, plus possible cost of continuation of treatment for grants terminated at the end of Phase 1.  Underlying spreadsheet available from GFO upon request.

Of course, the Fund will receive some additional pledges in the course of 2006 and 2007, which will somewhat improve this situation.  But the “replenishment meeting” last year was supposed to be the time at which donors specified their pledges for 2006-7; so any further pledges will require donors to go beyond what they promised at that time.

The Global Fund Secretariat is officially hoping for a Round 6 in 2006 costing $1.1 b., and for Rounds 7 and 8 in 2007 each costing $1.3 b.

As shown in Table 2, the Fund’s revenue was about $1 billion per year in each of 2002 and 2003, and about $1.5 billion per year in each of 2004 and 2005.  The table also shows that if the Fund is to be able to launch Rounds 6, 7 and 8 during 2006-7 at the levels anticipated by the Secretariat, the Fund’s annual revenue will have to double this year (to nearly $3 billion), and then grow by another third (to over $4 billion) in 2007.  The major donors have certainly indicated that they wish to significantly increase their total overseas development assistance in the coming years, but they have not yet suggested they are considering increasing their Global Fund pledges to anything like the levels shown in Table 2 during this year and next.

Table 2: Global Fund Revenue Needed to Support Rounds 6-8 in 2006-7 (US$ million)

Actual Projected
2002 2003 2004 2005 2006 2007
Revenue (ie contributions/pledges, less administrative costs), on the same basis as Table 1 954 932 1,519 1,495 1,724 1,565
Additional pledges needed to cover R6 ($1.1b) in 2006 and R7 and R8 ($1.3b each) in 2007 1,121 2,550
Total Global Fund revenue if these additional pledges are received 954 932 1,519 1,495 2,845 4,115

Arising from all this, it is possible that some donor board members, at the April board meeting, will urge a more cautious approach.  This might consist of issuing the Call for Round 6 proposals after the November 2006 board meeting rather than after the April 2006 board meeting, with the grants to be approved in mid-2007, and then issuing the Round 7 Call for Proposals a year later (November 2007), and Round 8 one year later still.

There is one additional complication, which is that for the first time, proposals in Round 6 and later will be of two types.  The first type will be proposals that represent extensions of Round 1-5 grants that are coming to the end of their five-year term.  (These can be thought of as “Phase 3” proposals, following on from the Phases 1 and 2 covered in the original Round 1-5 grants).  The second type will be proposals that represent truly new grant activities, so far as Global Fund grants to that country are concerned.  It seems almost inevitable that the Fund will have to give priority to the first type – that is, to “Phase 3” proposals.  In the worst-case scenario, with Round 6 not launched until November 2006 or even April 2007 and Round 7 not launched until April 2008, Round 6 might have to cover as much as $1 billion in “Phase 3” grants, leaving little or no Round 6 money to cover “truly new” grants.

To put it another way: If pledges to the Fund do not increase significantly, and the Fund does not modify its Comprehensive Funding Policy, the Fund will be forced for at least the next two years to be “the Global Fund for the Care and Support of Round 1-5 Grants”.

Source: reproduced from the Global Fund Observer Newsletter (05/03/06, issue 55), a service of Aidspan (an independent watchdog of the Global Fund and publisher of GFON).

Global Fund Observer:


As the May issue of HTB went to press, GFON reported that the Global Fund Board agreed to launch Round 6, despite the very real possibility that there will not be enough money to fund all the proposals submitted that are worthy of approval. Applicants will have until August 3 to submit their proposals.

The Board issued an urgent appeal to current and potential donors to expedite and increase their pledges for 2006 and 2007 so that Round 6 can be adequately funded.

The Fund has also terminated two HIV grants to Nigeria because of inadequate performance. At the Board meeting last week, no board members spoke up in defence of Nigeria’s handling of the grants. One of the grants was supposed to have 14,000 people on ARV treatment by the end of the first year, but the actual number was zero. The termination will cost the country $81 million in lost grant income.

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