Phase 2 Grant Renewals - March 2005 -

1. Phase 2 Grant Renewals- March 2005 -

2. A- Overview A.1- Performance-based Funding Y1 Y2 Y3 Y4 Y5 Proposal Initial Grant Agreement(s) Extension of Grant Agreement(s) Phase 1 Phase 2 • Proposals are approved for up to a 5 year term • However, Global Fund initially commits funds for only years 1 and 2 – “Phase 1” • Funding beyond Phase 1 is based on: • Performance during Phase 1 and contextual considerations; • Availability of resources. • Performance assessment builds on periodic reviews throughout Phase 1 (quarterly/semi-annual Disbursement Requests/Progress Updates), complemented by an Annual Review and an Audit Report

3. A- OverviewA.3- Phase 2 Review and Decision-making Process • The Phase 2 review process is a multi-layer process involving different actors within and outside the Secretariat; and is designed to assure the quality and robustness of the Secretariat’s recommendation to the Board:

4. A- OverviewA.4- Key Success Factors for CCMs The first wave of Phase 2 Renewals has enabled the Secretariat to identify “key success factors” that CCMs should endeavor to address in their Requests for Continued funding • Ensure that any shortcomings, weaknesses and issues identified during Phase 1 are addressed on a continuous basis (and not in the last remaining weeks before Phase 2 Grant Renewal decision-making). The Phase 2 Grant Renewal review process appraises performance throughout the initial Phase 1 period, and not only achievements in the last reporting period. • Ensure that the Phase 2 Request includes an objective “self-assessment” of the program and takes into account “lessons learned” from Phase 1 (especially in cases of sub-optimal performance, as well as changing programmatic and epidemiological context). The CCM is encouraged to address any reprogramming considerationsand to request a reasonable Phase 2 amount. KEY SUCCESS FACTORS • Ensure that the preparation of the Phase 2 Request involves the strong participation of the entire CCM. • Ensure that all information and documentation necessary for the Phase 2 decision-making are submitted on time to the Secretariat (with the right level of completeness and quality). Incomplete and/or late information is likely to jeopardize the success of the Phase 2 Grant Renewal.

5. ILLUSTRATION B- Phase 2 Grant Renewal Review CriteriaB.1- Grant Performance during the initial grant period (1/2) The Global Fund evaluates programmatic achievement measured as cumulative up-to-date results against agreed-upon targets, together with self-assessment of performance. The evaluation of performance focuses on coverage indicators (1-people trained, 2-service points set-up or enhanced, 3- people reached). It considers people reached as the highest level. • In order for the Global Fund to take into account latest available programmatic information, CCMs should make sure that the latest Progress Update is submitted as scheduled (i.e., typically month 15 for Quarter 5).

6. ILLUSTRATION B- Phase 2 Grant Renewal Review CriteriaB.1- Grant Performance during the initial grant period (2/2) The Global Fund also considers disbursement history and expenditures in light of the 2-year Budget (i.e., the Phase 1 Grant Amount). The evaluation of performance also includes reviewing disbursement history, notably in light of programmatic results. ! Where necessary, the Secretariat will take into account information on expenditures and expected remaining cash balance at the end of Phase 1 (at the PR level).

7. Have there been significant adverse external influences (force majeur)? And if yes, can they be alleviated? Are there any unresolvable internal issues? Are there any financial and program management issues (e.g., slow or incomplete disbursements to sub-recipients or issues with the PR)? Are there any systemic weaknesses in: - Monitoring and evaluation? - Procurement and supply management? - Any other areas? Are there any material issues concerning the quality or validity of data? B- Phase 2 Grant Renewal Review CriteriaB.2- Contextual Considerations (1/2) As part of its evaluation, the Secretariat considers contextual information in its review of Phase 2 Grant Renewals. Contextual Considerations

8. B- Phase 2 Grant Renewal Review CriteriaB.2- Contextual Considerations (2/2) Beyond performance evaluation, the Secretariat considers contextual information in its review of Phase 2 Grant Renewals. - Continued - Have there been any major changes in the program-supporting environment? (e.g., recent initiation of capacity-strengthening, support of implementation by technical partners, changes in intervention context or political commitment) Have there been any changes in disease trends? Contextual Considerations Has the program demonstrated significant improvements in implementation over the last 6 months? Is there any information that would indicate that the program was not advancing the Global Fund’s operating principles to: • Promote broad and inclusive partnership? • Promote sustainability and national ownership through the use of existing systems and linkages with related strategies and programs? • Provide additional resources?

9. ILLUSTRATION Phase 2Proposal Amount - $15M - Phase 1 Grant Agreement Amount - $20M - Expected undisbursed Phase 1 Amount - $4M - Expected additional Phase 1 Disbursements - $6M - Actual Disbursements to date - $10M - C- Phase 2 Budget and Intended ResultsC.1- Phase 2 upper-limit amount The maximum amount available for Phase 2 funding is equal to the proposal budget for the full term of the program less funds disbursed to the PR in Phase 1. PHASE 2 UPPER-LIMIT AMOUNT - $19M - TOTALORIGINAL PROPOSAL AMOUNT - $35M - The Phase 2 upper-limit amount is not an entitlement. In circumstances where performance has been poor and there are Phase 1 savings, the Global Fund would expect a reduced Phase 2 budget request by the CCM. It is the responsibility of the CCM to request a reasonable Phase 2 amount.

10. C- Phase 2 Budget and Intended ResultsC.2- Phase 2 Budget The proposed Phase 2 Budget must be reasonable, feasible and fully justified (especially when it is equal to the Phase 2 upper-limit amount). PHASE 2 BUDGET ELABORATION The Phase 2 Budget submitted by the CCM must take into account: • Cost efficiency and productivity gains (linked to the Phase 1 experience) ; • Phase 1 programmatic performance ; • Usage of funds during Phase 1 (actual and projected, including expected savings) ; • Anticipated program realities for Phase 2; • Absorptive capacity; and • Funding availability from other sources (for the program). PHASE 2 BUDGET JUSTIFICATION The Phase 2 Budget must be fully justified especially in circumstances of: • Significant under-utilization of funds in Phase 1; • Under-performance in Phase 1 (in terms of programmatic results); and • A Request for the entire Phase 2 upper-limit amount. ! An inflated or inadequately justified budget request is likely to be negatively viewed by the Global Fund.

11. ILLUSTRATION C- Phase 2 Budget and Intended ResultsC.3- Objectives, Scope of Activities and Intended Results The intended results and scope of activity for Phase 2 must take into “lessons learned” of Phase 1. The CCM Request must include Phase 2: 1- Objectives, 2- Scope of activities; and 3- Intended results. ! The CCM must make sure that the scope of activities and intended results are consistent with the original Board-approved Proposal. However, in cases of under-performance in Phase 1 or of changes in the programmatic and epidemiological context, the CCM should consider the necessity of reprogramming: - Revise the scope of activities; and/or - Adjust budgets and targets.