Xu 2017mitra

2016-17 Mitra FAMILY GRANT Recipient Saving Health Aid from Death’s Door: Analyzing Fraud in the The Global Fund to Fight AIDS, Tuberculosis and Malaria through the Principle-Agent Problem in Nigeria Raymond Xu, Class of 2017

Saving Health Aid from Death’s Door: Analyzing Fraud in the The Global Fund to Fight AIDS, Tuberculosis and Malaria through the Principle-Agent Problem in Nigeria

Raymond Xu 2017 Mitra Family Scholar Mentors: Ms. Carol Green, Mrs. Lauri Vaughan April 12, 2017

Xu 2 Intergovernmental organization and nongovernmental organization (NGO) aid is a crucial engine for the optimization of health care policy in developing countries. Economic development policymakers often deliberate the impact of aid programs. This conundrum was the topic of discussion at the 2000 Group of 8 meeting in Okinawa, Japan, where leaders from France, Germany, Italy, the United Kingdom, Japan, the United States, Canada, and Russia agreed on the need for a new financing mechanism to combat three extremely destructive and deadly diseases: AIDS, tuberculosis, and malaria.1 A year later, UN Secretary General Kofi Annan, proposed the establishment of a fund to coordinate the fight against these diseases, and soon after, The Global Fund to Fight AIDS, Tuberculosis and Malaria was approved at the UN Special Session on AIDS in June 2001.2 The Global Fund opened its Geneva headquarters in January 2002, and awarded its first grants in March of that year.3 The Global Fund attempts to respect sovereignty by having each country dictate the implementation of the aid they receive. The Global Fund Secretariat operates the Fund in Geneva while the Fund’s financing mechanism is more localized to each recipient country. The structure of the Fund’s financing mechanism is as follows: The Technical Review Panel (TRP), a body of 26 independent experts in economic development, decides overall grant allocations to countries based on technical merits. Funds are then disseminated to the Country Coordinating Mechanism (CCM), a management board in each country that includes representatives from incumbent governments, donors, NGOs, academic institutions, private sector representatives and people living with the diseases. The Principal Recipients (PRs) are the designated in-country 1

Amy Barnes, "The Global Fund to Fight AIDS, Tuberculosis, and Malaria: Expertise, Accountability, and the Depoliticisation of Global Health Governance," in Partnerships and Foundations in Global Health Governance, ed.

Simon Rushton (New York, NY: Palgrave Macmillan, 2011), 58.

2

Schocken, Celina. Overview of the Global Fund to Fight AIDS, Tuberculosis and Malaria. Research report.

Washington, D.C.: Center for Global Development, 1, 2006.

3

Ibid.

Xu 3 organizations chosen by the CCM to receive funding allocations from the Global Fund and to implement projects. In order for the TRP to evaluate project performance and determine whether or not funding should continue, an independent intermediary known as the Local Fund Agent (LFA) quantitatively evaluates and monitors projects in each country.4 Using this model, the Global Fund Secretariat has no direct presence in recipient countries, but instead has created a system of grant management in each country.

In the first ten years after its conception, the Global Fund continued to grow in size, but donations were severely hampered by rampant corruption scandals.5 It is important to clarify that fraud in the context of this paper refers to purposeful and premeditated acts of withholding essential information and manipulation for financial gain rather than gross incompetence by certain workers. On January 23, 2011, the Associated Press released a report entitled "Fraud Plagues Global Health Fund," immediately causing a massive media and donor backlash.6 The global recession decreased funding substantially, and this loss of trust forced the Global Fund to cancel its 2011 round of funding.7 The establishment of the New Funding Model (NFM) in 2013 marked the completion of a series of reform efforts that began after the cancelation.8 The NFM focused on investing more strategically, and differed from the original grant-awarding process by making the performance-

4

Ibid., 3.

5

Gonzalez, Laura. The First to Go: How Communities Are Being Affected by the Global Fund Crisis. Research report no. 4. Johannesburg, South Africa: Open Society Initiative for Southern Africa, 2, Accessed December 16, 2016.

6

Bernard Rivers, "The Global Fund at Ten Years: Not a Happy Birthday," Global Fund Observer Newsletter, February 6, 2012, accessed April 11, 2017.

7 8

Ibid., 8.

Krista Lauer, "New and Improved? Examining the Global Fund’s New Funding Model," Open Society Foundations, last modified May 24, 2013, accessed January 22, 2017.

Xu 4 based incentive structure much more pronounced.9 Each country is told how much aid to expect as a baseline, and strong program performance results in additional funding from the incentives pool.10 The NFM is analyzed because it prioritizes quantification of projects more than the original financing mechanism due to its greater emphasis on accountability.

As the largest institution taking a multisectoral approach towards combatting AIDS, tuberculosis, and malaria, the impact of the Global Fund has been tremendous. As evidenced by Fig. 1, the Global Fund’s impact is a direct function of the amount of aid disbursed.

Figure 1: This graph depicts the impact of the Global Fund with funding totals underneath.

Source: Global Fund, "Impact," Global Fund, accessed December 16, 2016.

Though the Global Fund has been essential in improving health conditions around the world, its work is not done. As any global aid organization would attest to, efficiency and efficacy are always areas for improvement. Since the funding structure of the Global Fund requires

9

Ibid., 5.

10

Ibid., 8.

Xu 5 intermediaries at almost every step of the way from the donation to the ultimate health service provided, analyzing these intermediary relationships can yield insights in Global Fund aid mismanagement.

Since fraud is a significant risk to the success of Global Fund investments, the structure of the Local Fund Agent – Principle Agent relationship necessitates the involvement of additional regulatory agencies for greater oversight. Coupled with a Technical Review Panel – Local Fund Agent relationship that is centered on a rigid quantitative evaluation of program efficacy, these intermediary interactions designed to promote accountability in the Global Fund financing mechanism force an inevitable increase in the very bureaucracy that the Fund was meant to avoid in its original conception.

Principle-Agent Problem In order to analyze inefficiencies in the Global Fund funding model through the lens of the different stakeholders, it is necessary to define the Principal-Agent problem. An example of an isolated principal–agent situation occurs when an individual consults a doctor or a lawyer.

The individual is the principal who is asking an agent for professional services to increase the principal’s welfare. The principal, however, does not have a guarantee that the agent will thoroughly consider their interest and provide them the best service.11 From this scenario, how the principal and agent relate becomes clearer. The principal is one who, within predefined terms, assigns a task to an agent, who performs the task on the principal’s behalf.12 If the agent’s incentives are not aligned with those of the principal and the principal cannot monitor the agent’s actions, the agent has both the motivation and the ability to act undetected against the principal’s 11

Clark Gibson, The Samaritan's Dilemma: The Political Economy of Development Aid (New York, NY: Oxford University Press, 2005), 43.

12

Sunit Shah, The Principal–Agent Problem in Finance (a summary) (Chartered Financial Analyst Institute Research Foundation, 2014), 1.

Xu 6 interests. When the principal–agent relationship is problematic, two ingredients are present: conflicting incentives and private information, otherwise known as information asymmetry.13 Information asymmetry is a crucial concern for foreign aid efforts, as it directly affects the success of grant projects in areas lacking oversight. Since one actor in the relationship can make an advantageous decision for herself since she has more information than the other actor, it often fosters the conditions for corruption.14 As referenced in the literature review, corruption weakens the Fund because it affects donor-funding streams. This finding undergirds a trust issue that prompts the Global Fund to emphasize transparency in order to appease donors. Proper communication channels and the ability to stem this information asymmetry require an effective balance between a top-down and bottom-up management structure to promote sustainable aid initiatives.15 The following sections will argue that two principal-agent relationships in the Global Fund model, Local Fund Agents and Principle Recipients, and the Technical Review Panel and Local Fund Agents, can become problematic in face of information asymmetry and thereby increase bureaucratic management.

Local Fund Agent and Principle Recipient Relationship The principal-agent relationship that exists in closest proximity to the actual deployment of funds for some tangible impact on health care is the interaction between LFAs and PRs. LFAs recommend whether the PR should receive the next phase of funding and must collaborate and engage in proper information sharing with PRs to make an accurate assessment of project efficacy. In this case, the LFA, as the principal, should optimize its grant portfolio by

13

Ibid.

14

Claudia Williamson, "Exploring the Failure of Foreign Aid: The Role of Incentives and Information," Review of Austrian Economics, 5, accessed September 7, 2016.

15

Ibid.

Xu 7 recommending projects with maximum impact in a given country, and the PR, as the agent, implements the aid by either directly investing in projects or providing funding to additional subPrinciple Recipients to ultimately, hopefully meet performance benchmarks and generate its expected health impact.

This relationship becomes problematic when the PR’s incentives do not align with the LFA’s and the LFA is unaware of this shift because of information asymmetry. The most likely scenario in which these conditions arise is fraud. When LFAs evaluate PRs, undetected corruption makes aid distributions extremely inefficient because the money does not go to servicing disease-afflicted people and when the fraud is discovered, donors become worried and potentially withhold funding until the mismanagement is corrected. The Congressional Research Service’s brief, The Global Fund to Fight AIDS, Tuberculosis, and Malaria: Progress Report and Issues for Congress, explores Section 525 of P.L. 109-102, FY2006 Foreign Operations Appropriations as a lens for determining aid levels.16 Under this codified rule in the annual budget, 20% of required United States contribution to the Global Fund is withheld until the Secretary of State certifies to the House and Senate Appropriations Committees that the Fund has strengthened oversight practices.17 This regulatory measure foreshadows the potential for the Global Fund to become beholden to politicization in donor nations. From a purely operational standpoint, anti-corruption efforts therefore have to play a sizable role in Global Fund operations to ensure continued funding. When large donation sources are cut off, Global Fund assistance is uncertain and therefore unhelpful to sustaining local NGOs that are almost always short on

16

Tiaji Salaam-Blyther, The Global Fund to Fight AIDS, Tuberculosis, and Malaria: Progress Report and Issues for Congress (Washington, D.C.: Congressional Research Service, 2008), 12.

17

Ibid., 13.

Xu 8 funding. Stemming corruption therefore becomes a mission-critical issue for the Global Fund to see through its vision of AIDS, malaria, and tuberculosis eradication by 2030.

A relevant case study for analyzing the Global Fund’s principal-agent relationship is the incident of drug purchasing fraud in Nigeria uncovered in 2016. Using Nigeria as a case study is valuable because of its role at the forefront of the fight against AIDS, tuberculosis, and malaria.

Malaria is pervasive in Nigeria with 76% of the population living in high malaria risk areas.18 There are an estimated 3.4 million people living with HIV, a key driver of the tuberculosis burden.19 Given the incidence rate of these diseases in the country, the Nigerian CCM was one of the first established in wake of the Global Fund’s launch, and PricewaterhouseCooper (PwC) was contracted to be the LFA for the country. Nigeria is the largest recipient of Global Fund aid, with $1.3 billion disbursed since 2003 to provide 750,000 HIV patients with anti-retroviral drugs and 93.4 million mosquito nets.20 Yet, Nigeria historically has faced substantial challenges in managing health resources, both a reason for why funding allocations in Nigeria are so high and why regulatory agencies keenly scrutinize aid in the country. Highlighting areas in which the principal-agent relationship became problematic in Nigeria can provide insight into whether the general structure of this relationship is still beneficial for achieving impact.

The Office of the Inspector General (OIG), a Global Fund arm that operates at the same level as the Technical Review Panel analyzes and audits recipient countries’ aid finances. Access was denied to the Nigerian CCM resources online that provide links to evaluations of its grants allocated to the six PRs. Additionally, PwC is the LFA in Nigeria, but its website does not

18

Office of the Inspector General, Global Fund Grants to the Federal Republic of Nigeria, report no. GF-OIG-16014, 1, May 3, 2016.

19

Ibid.

20

Ibid., pg. 8

Xu 9 contain any reports from its spot-checks or full audits, only marketing material detailing its superb job in “fund management and governance…as the LFA for 66 countries.”21 Therefore, analysis by independent journalists and NGO reviews of the OIG audit are used to examine this mismanagement in the absence of other available primary sources.

From 2010 to 2014, portions of the aid that were awarded to the National Agency for the Control of AIDS (NACA) and the National Malaria Elimination Program (NMEP), two of the five PRs in Nigeria, were siphoned away.22 Because NACA and NMEP did not use the Global Fund Pooled Procurement Mechanism (PPM) to monitor drugs distributed in Nigeria, which is standard practice since the PPM sources medicine at the cheapest available price by buying in bulk and monitors its disbursement, this resulted in discrepancies in the reported amount of antiretroviral drugs to the tune of $3.7 million for NACA and artemisinin drugs worth $500,000 for NMEP.23 Ten government officials stole this amount over the four year period by misreporting payments and stock records, and the LFA did not discover the profit skimming in its own audit.24 Since the fraud had extended to the level of the Ministry of Health, the LFA could not track any misreporting since it faced governmental roadblocks.25 By ignoring the PPM’s role in health commodity distribution, it is clear that the PR incentives were altered by greed and that information asymmetry existed since there was no accountability in non-PPM

21

PricewaterhouseCoopers, Building Aid Effectiveness Through Sound Fund Management (PricewaterhouseCoopers, 2007), 5, accessed January 23, 2017.

22

Independent Communications Network Limited, "Breaking News: Nigerian Officials Steal $3.8m HIV/AIDS Money," The News Nigeria, last modified May 6, 2016, accessed January 16, 2017.

23

Ibid.

24

Ibid.

25

ProjektHope Nigeria, "Global Fund suspends grant to Nigeria’s HIV/AIDS intervention due to large scale fraud, mismanagement and incompetence by NACA," NigeriaHIVInfo, last modified May 5, 2016, accessed December 16, 2016.

Xu 10 channels and no expected wrongdoing. Therefore, the conditions causing the principal-agent problem to arise were satisfied. Bypassing the PPM essentially made the LFA obsolete, which is especially problematic since the Global Fund’s risk management strategy is predicated on the LFA closely monitoring aid programs and establishing procurement controls to successfully prevent theft.

The PPM is further evidence of the growing bureaucracy installed in each recipient country, yet its failure to prevent fraud in Nigeria suggests that an only top-down reporting system at a country-level is still insufficient. As nearly 40% of Global Fund grants are used for health commodity procurement, the Fund is a crucial player in this market.26 In addition to the bulk purchasing function of the PPM in lowering prices, the Global Fund began directly negotiating with artemisinin therapy producers in 2010 through the Affordable Medicines Facility—malaria (AMFm) program, marking the first time it directly intervened in setting a market price.27 AMFm consists of three components: transparent and quality assured artemisinin drug manufacturing, a buyer subsidy, and advertisement for anti-malarial control products.28 Tougher’s benchmark study, commissioned a year after the program was implemented, found that properly sourced artemisinin drugs increased in availability at Nigerian public health facilities by 41.7%. Overall, it seems as though Nigeria has for once met the global standard for drug availability.29 The significant role these Global Fund initiatives play in Nigerian health care

26

Frank Wafula, "Procurement Cost Trends for Global Fund Commodities" (working paper, Aidspan, Nairoibi, Kenya, April 2013), 2, accessed January 23, 2017.

27

Ibid.

28

Sarah Tougher, "Effect of the Affordable Medicines Facility—Malaria (AMFm) on the Availability, Price, and Market Share of Quality-Assured Artemisinin-based Combination Therapies in Seven Countries: A Before-and-after Analysis of Outlet Survey Data," The Lancet 380 (December 2012): 1918, accessed January 23, 2017.

29

Ibid., 1923

Xu 11 begs the question of how the efficacy of such programs is assessed. As part of the PPM, the Price and Quality Reporting (PQR) system is supposed to manage drug procurement and distribution.30 As yet another auditing tool in place in Nigeria, the PQR was the specific monitoring program avoided when the $3.8 million was stolen in Nigeria. Despite these setbacks engendered by corruption, the positive effects of the AMFm program on the Nigerian health market played a similar role to what would be government regulation or subsidization of the pharmaceuticals sector, signaling the shift from nation-wide health programs promoted in the Global Fund Framework Document to empirically more effective multilateral programs like the AMFm. Systems like the PPM in place in Nigeria reflect a growing trend in Global Fund operations to implement more technically sound, expert-managed global programs at the expense of sovereign health programs that clearly lack proper supply chain management. The Global Fund deviates from its purported role as a financing mechanism through the use of PPM programs, as the Global Fund essentially replaces the role of the government in correcting for market failures.

After the LFA spot-checked a sub-Principle Recipient of NACA, the Department of Health Planning, Research & Statistics (DPRS), they found that $1.4 million of expenditures on hotel venues and travel were embezzled with falsified documents. The OIG was alerted and began an audit that resulted in a receipt reconciliation to calculate all aid-related expenditures in Nigeria.31 They concluded that LFA auditing had missed a total of $3.8 million in drug purchase discrepancies.32 As 70% of the total grant budget for Nigerian health aid is intended for health commodity procurement and distribution, significant misreporting in the drug supply chain 30

Wafula, "Procurement Cost," 7.

31

David Garmaise, "OIG Investigation Reveals Fraudulent Activities by an SR in Nigeria," Aidspan, last modified May 10, 2016, accessed January 23, 2017.

32

Ibid.

Xu 12 undermines the provision of health care to disease-afflicted Nigerians.33 However, the extent of such malpractice is magnified and prolonged when the LFA is only able to identify a much smaller offense like misreporting hotel expenditures that does not implicate the entire health sector infrastructure in Nigeria. A rough proportional estimate relative to total aid amounts in Nigeria suggests that the $3.8 million translates to providing antiretroviral treatments to more than 1,750 Nigerians, a sizable impact on health conditions.34 Existing scholarly work on corruption in Nigeria supports the view that corruption in the health sector is a manifestation of information asymmetry. Payment systems, as in the case study, are especially at risk because kickbacks and bribes can often influence key suppliers and a large number of actors add to the complexity of operations built on such nascent health infrastructure.35 A 2006 World Bank analysis of the Nigerian health sector found that in total, Nigeria had lost $282.6 billion to corruption.36 Additional anecdotal evidence supports the prevalence of health sector fraud in Nigeria, especially with drug procurement. In 2008, the Canadian government provided a shipment of Vitamin A supplements that was diverted and ended up illicitly sold to pharmacies across the country.37An interview with a key Nigerian health minister in charge of meeting UN Millennium Development Goals found that government

33

Office of the Inspector General, Global Fund, 8.

34

$3.8 million is 0.2% of the $1.6 billion allocated to Nigeria since 2003, and since that $1.6 billion total resulted in 750,000 antiretroviral drug treatments, $3.8 million would provide around 1,780 treatments 35

Adegboyega Kamorudeen, "Corruption in the Nigerian Public Health Care Delivery System," Sokoto Journal of the Social Sciences 2, no. 2 (December 2012): 103, accessed February 10, 2017.

36

S. A. J. Obansa, "Health Care Financing in Nigeria: Prospects and Challenges," Mediterranean Journal of Social Sciences 4, no. 1 (January 2013): 224, accessed February 10, 2017.

37

Ibid.

Xu 13 officials under his purview were often actively hindering the country’s ability to meet those goals by stealing funds.38 A possible explanation for why the agencies tasked for improving Nigerian health might be purposefully holding the country back is the moral hazard problem. The moral hazard problem occurs when individuals indemnify themselves against loss regardless of their efforts to avoid such loss and therefore engage in more risky behavior.39 A hypothetical example of moral hazard in the context of Nigerian Global Fund operations would be as follows: the Nigerian government knows that as the largest recipient of Global Fund aid, they will always continue to have a steady stream of aid. Therefore, it would be easy to distribute aid to programs that claim massive impact but seem suspect in their management. Even if funds were lost, and mysterious wads of money were mailed to Nigerian officials months later, the moral hazard problem would occur if the Global Fund sustained its existing levels of funding even after the fraudulent transaction.40 From a theoretical standpoint, there are various ways of blindsiding the LFA from recognizing fraud in its audits, especially when government officials, supposedly a trustworthy source, are often the direct perpetrators of such theft. LFA effectiveness assumes that the PRs and affiliates being audited are forthcoming and transparent; otherwise, there is no local enforcement mechanism to force aid recipients to reveal the financial status of their operations.

The insertion of the OIG as an external auditor of Nigerian PRs alters the existing LFAPR relationship. The OIG becomes another check on inefficiencies that may arise from the principal-agent problem since its primary goal in an audit is to effectively eliminate information asymmetry by processing all financial information. While the LFA’s auditing function is meant 38

Ibid., 104.

39

Gibson, The Samaritan's, 42.

40

Ibid.

Xu 14 to deter corruption by conducting regular spot-checks, once extended periods of fraud have already occurred, thorough investigation by the OIG’s objective and top-down view is required.

This additional layer of monitoring with greater resources exists because of the Global Fund’s high-level risk management strategy and the fact that Nigeria has been flagged for riskiness; from 2013 to 2015, Nigeria’s risk scorecard, used by the Global Fund to track its portfolio of grants, increased from 2.38 to 2.6, receiving a dark red (very high) level of risk designation.41 This surge suggests that a bureaucratic method of spot-checking is necessary to supplement existing LFA monitoring in cases in which the LFA fails to identify sources of misappropriation, especially in countries like Nigeria where the risk of failed aid implementation is already exceedingly high. The importance of mitigating fraudulent conduct incentivizes the Global Fund’s growing dependence on regulatory bodies like the OIG. In addition to the OIG, the potential impact of the principal-agent problem arising from PR corruption has been further diminished because of the Global Fund’s repayment policy for donor aid that is lost due to fraud. Upon release of the OIG report in 2016, the Global Fund immediately suspended aid to Nigeria until the country pays back the missing funds so that no donor funds are lost.42 If Nigeria refuses to reimburse the Global Fund, Nigeria will lose double the amount lost to fraud, so in this case, $7.6 million, in its future grants.43 This threat of a fine is the most effective solution available because it further reduces the propensity for mismanagement by preventing moral hazard, often a major contributing factor in why an agent’s

41

Office of the Inspector General, Global Fund, 5.

42

Independent Communications Network Limited, "Breaking News," The News Nigeria.

43

Cees Klumper, "Meet The Repo Man for Global Health: Skim Off a Grant, He'll Make You Pay," interview by Nurith Aizenman, NPR, last modified February 9, 2016, accessed January 16, 2017.

Xu 15 incentives might get altered to the extent that they would be considered fraud in the first place.44 In addition to removing incentives for corruption, fines also lessen information asymmetry.

The Nigerian CCM has to worry about how aid is distributed because their aid totals are not fixed and therefore not indemnified from PR transgressions. Accountability ultimately requires ownership, thereby eliminating the moral hazard problem. Additionally, fines encourage the CCM to be as forthcoming as possible by encouraging PRs to disclose all financial information to LFAs so that no information is kept as private, thereby decreasing the risk of information asymmetry. This system presents yet another essential check on fraudulent behavior since the costs of misreporting and misallocation of aid are multiplied, or in this case doubled, to deter gross negligence through loose regulation by the CCM and the LFA. Therefore, opportunism should be deterred because the risk of fines hurts recipients far more than anyone else.

The important outcome from this financially punitive measure is that the Global Fund always benefits. Ceasing funding to Nigeria and demanding extra payment is a rational response to fraud since it dries out the well of supplementary funding required to sustain important and often effective programs in the country. An interview with the Chief Risk Officer of the Global Fund, Cees Klumper, reveals that the Fund takes a strictly utilitarian approach towards aid.45 When asked about the ordinary people that would suffer due to fraudulent behavior by a couple of selfish actors, Klumper responded, “the penalty just amounts to taking funds from country A and sending them to country B — which also has a need. Different people will benefit than the ones who were originally intended to benefit. But in the end, the overall impact will be the same.

44

Gibson, The Samaritan's, 42.

45

Klumper, "Meet The Repo," interview, NPR.

Xu 16 The funding is not going to waste.”46 From a moral standpoint, this stance is extremely detached from the suffering that occurs on the ground in each disease-afflicted country, which reflects the cold rationality of a top-down management style and is reminiscent of one of the main criticisms of the UN and World Bank’s aid programs. While the multi-faceted organizational approach towards risk that the Fund employs involving both the OIG and CCMs might be able to counterbalance, or at the very least mitigate, the negative effects of information asymmetry between LFAs and PRs, it comes with the cost of more robust development advisory programs that are sandwiched between localized programmatic assistance endeavors and a top-down view that makes the organization unfamiliar with the needs of Global Fund-dependent aid recipients.

While theoretically advantageous for the Global Fund, whether the punishment model is effective or not for this case of fraud in Nigeria cannot be proven at this time. Given the recency of this scandal, there is no record of the country actually repaying the lost funds since this entire situation is still in progress. However, Nigeria historically has not addressed fraud effectively.

While Nigeria acts as though it is poised to move past this scandal, exemplified by the Nigerian Minister of Health Isaac Adewole’s January 2017 speech reaffirming his country’s commitment to accountability, the country has a history of failing to repay lost funds in incidents not dissimilar to the drug purchasing fraud discovered in 2016.47 For example, in 2015, the Global Fund implemented the 2:1 fine on Nigeria’s 2014-2017 grant allocations after the country missed several repayment deadlines for $5 million determined to be lost after a 2011 OIG audit.48 Yet, there is no indication the Nigerian CCM has returned the missing funds, as the CCM claimed 46

Ibid.

47

Nike Adebowale, "Nigeria: Global Fund to Invest N1 Billion On Health in Nigeria - Minister," All Africa, last modified December 13, 2016, accessed January 16, 2017.

48

Tunde Akpeji, "Global Fund May Reduce Funding to Nigeria Because Some Recoverable Amounts Have Not Yet Been Repaid," Aidspan, last modified October 1, 2015, accessed January 22, 2017.

Xu 17 government assistance was necessary to recover the funds due to legal bottlenecks.49 Failure to reimburse lost funding unveiled in a 2011 report six years later does not bode well for repayment in this more recent case, signifying that the extensive investigative capabilities of both the LFA and the OIG do nothing to resolve the structural issue of Nigeria’s health care sector severely lacking money. Though the allocation reduction punishment model has not been met with much success in Nigeria, its ability to mitigate moral hazard and information asymmetry still makes it the best available option. As of March 2016, the Global Fund had recovered 65 percent of funds lost to fraud globally.50 Ultimately, the existence of such a fine requiring Global Fund Secretariat approval is further evidence of the growing bureaucratization of decision-making in recipient countries.

For now, it seems the Global Fund has received validation for its swift resolve in dealing with the case of fraud in Nigeria in its most recent funding totals. After a fundraising conference in Montreal in September 2016, headlined by Canadian Prime Minister Justin Trudeau, Bono, and Bill Gates, global donor allocations for 2017-2019 reached $12.9 billion, continuing the growth in the size of the Fund’s coffers.51 These new funding totals correlate well with the structural changes the Global Fund has made to become more resilient to cases of corruption after its canceled round of financing in 2011. Though not causally linked, the increased integration of risk management policies into the Fund from both a local and more global vantage point seems to renew donor confidence in the Fund. The next section of this paper further explores the significance of donor influence in the Global Fund financing process.

49

Ibid.

50

The Global Fund, Results Report 2016, 36, accessed February 10, 2017.

51

"Global fund raises $12.9 billion to fight AIDS, TB, malaria," Premium Times, last modified September 19, 2016, accessed January 16, 2017.

Xu 18 Technical Review Panel and Local Fund Agent Relationship The Technical Review Panel and Local Fund Agent relationship reflects a technocratic, results-oriented aspect of Global Fund operations. The TRP, in this case the principal since it is the overarching body of independent health policy experts that determines grant allocations for each country, instructs the LFA, the agent, to act on its behalf by recommending, essentially de facto deciding, which PRs should continue to get funding. There is an implicit agreement in contracting out quantitative reviews to the LFAs that the LFAs essentially operate with the authority of the TRP in each country, all for promulgating the goal of the Global Fund: maximizing financial resources to combat AIDS, malaria, and tuberculosis in each recipient country.52 The TRP is the linchpin for the Global Fund’s goal of being apolitical and technically driven because its members are experts across the multisectoral health aid spectrum who quantitatively review grant proposals. Given this expert status, the TRP almost controls the entire funding process because, in 90% of the cases, it directly determines whether or not a grant is approved because the Global Fund Secretariat largely bases its decisions on the recommendations of the TRP and does not have the resources to separately review every proposal.53 Their recommendations to the Board consist of one of four categories of rating: 1.

Recommended without condition 2. Recommended conditionally 3. Not recommended with the possibility to revise and resubmit and 4. Rejected.54 The explicitness of the model should appease donors, who are meant to see this evaluation mechanism as reassurance that their money

52

Barnes, "The Global," in Partnerships and Foundations, 61.

53

Ibid., 62.

54

Ibid., 61.

Xu 19 is being used properly. To this end, the Global Fund has made significant strides in accountability measures in the NFM, of which performance-based funding is foremost.55 The LFAs constitute the main recipient of information from reporting programs. Victoria Fan’s Grant Performance and Payments at the Global Fund details a statistical approach towards evaluating aid program efficacy and reveals shortcomings with the performance-based funding model (PBF).56 Global Fund grants are awarded in phases, where a grant rating calculation at the end of each phase directs grant disbursement levels for the next round. In theory, the technical emphasis that defines the TRP—LFA relationship in the form of performance-based funding metrics should resolve problems implicit in the principal-agent relationship by mitigating information asymmetry. PBF is supposed to increase accountability in each recipient country by making project outcomes explicitly observable and share common goals and deliverables.57 This relationship should not face the same challenge as the LFA—PR interaction because the principal can in this case monitor the agent’s activities, which come in the form of audit reports and grant scorecards. However, Fan’s regression analysis of global Fund-supported aid totals found that Phase 2 grant disbursement are only sometimes influenced

by Phase 1 grant ratings, suggesting there is a fundamental disconnect in how funding levels are determined quantitatively.58 Indeed, “by having so many indicators used to calculate the composite grant rating and various discretionary factors, the Global Fund risks not leveraging

55

Lauer, "New and Improved?," Open Society Foundations.

56

Victoria Fan, Grant Performance and Payments at the Global Fund, research report no. 31 (Washington, D.C.: Center for Global Development, 2013), 2.

57

Ibid.

58

Ibid., 6.

Xu 20 PBF to improve performance.”59 Her work provides a quantitative supplement to a more anecdotal standpoint that can allow for further precision in pinpointing which component of the Fund’s bureaucratization hinder project implementation.

Using a survey of PRs in recipient countries around the world, conducted by Aidspan, an independent NGO watchdog of the Global Fund, it is possible to identify potential causes for why a perfectly functioning technocracy based on grant evaluation is misguided idealism.60 The statistics and responses are regionally specific but not country specific, so in order to stay consistent with the Nigerian case study in the prior section, responses from sub-Saharan African PRs are primarily used in the analysis.

The main limitation in using this source of information is that there might be response bias in the results; the survey potentially opens up an avenue for PRs to publicly complain about Global Fund mismanagement, which may inflate the proportion of critical reviews. Despite this potential drawback, this survey is still valuable because PRs are on the frontlines of Global Fund operations and hearing their firsthand feedback about LFAs is the closest to direct evidence of LFA shortcomings accessible to the public. Comparatively, Global Fund grant information is published on their website, but it lacks contextualization to LFAs and PRs, making it very difficult to isolate potential causal factors of inefficiency.

Analyzing criticisms of the LFA monitoring mechanism yields insight into how exactly on-the-ground organizations interact with this agent of the Fund. Prior sections have established the process of LFA auditing, especially in risky sub-Saharan African countries, but it is important to recognize that quantitative metrics may not perfectly capture the reality of the PRs’

59 60

Ibid., 15.

Frank Wafula, "Global Fund Principal Recipient Survey: An Assessment of Opinions and Experiences of Principal Recipients" (working paper, Aidspan, Nairobi, Kenya, April 2013), 1, accessed January 16, 2017.

Xu 21 operations. In answering the question of whether “the grant rating system [used by the LFA to craft their recommendations to the TRP] accurately reflects performance,” only 36% of PRs agreed. More specifically, only 22% of sub-Saharan Africa PRs agreed, while 46% of PRs in other parts of the world agreed.61 This statistic suggests that a global one-size-fits-all approach towards measurement is not appreciated by the PRs who are implementing the actual programs, especially in sub-Saharan countries flagged for poor risk management scorecards.

This scenario gives rise to the first of several measurement obstacles the Fund’s PBF model faces: skewed reporting. The obstacle occurs when the evaluation targets only the key metrics to ensure future funding and not real program impact.62 While indeterminate based on survey findings, it is very possible that PRs see that their projects have had an intangible effect that cannot be molded into a fixed calculation model, and these outcomes could include opening up rural communities to greater health infrastructure construction or reversing stigma towards HIV treatment medication. Though respondents probably would not concede this fact, it is possible that LFA evaluations also overstate the impact of PR projects due to attribution failure, which contends that is extremely difficult to discern the directly attributable impact of Global Fund financing, as there are other programs and funds working in the countries as well.63 Overall, these measurement obstacles are significant sources of error in LFA auditing that could contribute to why PRs are dissatisfied with LFA ratings.

The open-ended feedback section of the survey yielded further harsh criticism of LFAs, pinpointing specific areas of discontent with how LFAs operate. The following sampling of 61

Ibid., 5.

62

Rachel Silverman, "Measurement Obstacles to Achieving Value for Money at the Global Fund: A Problem Statement" (working paper, Global Health Policy Program Center for Global Development, October 2013), 18.

63

Ibid., 14.

Xu 22 responses from the Aidspan survey provides examples for the incompatible skillset measurement obstacle. A governmental PR commented that: “An issue that should worry the Fund is the technical capacity of the LFA. Our LFA is good on financial issues, but it should strengthen its technical side at least in the three diseases and understand the reality of the health system.”

Multiple non-governmental PRs agreed with this sentiment, as one remarked: “Maybe there are experts within the LFA team who qualify for this job, but the people we work with are pretty much accountant type and no more. Overall, a disappointing experience with the current LFA...”

Most LFAs are accounting firms with core expertise in audit, not monitoring and evaluation, which already makes these agents out of tune with the specific operations of the PRs.64 This conclusion is supported to a certain extent by the emphasis found in the promotional material released by PwC referenced in the prior section: there is no mention of specific technical capabilities, just a strong accounting service.65 Several responses contend that the LFAs are unresponsive intermediaries, which amplifies the existing concern that they do not adequately understand health aid: The Fund should consider a local staff (regional). Although we have very good communication with our portfolio manager, a local presence would give more attention and monitor country programmes. The LFA functions as an accounting firm, and often does its job without assessing our comments...66 It seems almost paradoxical to blame PRs for poor grant performance without having an infrastructure in place to provide them with adequate guidance and support, something LFAs clearly cannot offer. Since LFAs are contractually obligated to recommend whether funding 64

Silverman, "Measurement Obstacles," 14.

65

PricewaterhouseCoopers, Building Aid Effectiveness, 5.

Wafula, "Global Fund," 21.

66

Xu 23 should continue based on objective performance, their recommendations to the TRP to suspend funding may not, in practice, be consistent with the overall mission of the Global Fund given these inefficiencies and measurement obstacles. The founding Framework Document of the Global Fund states that: “The Global Fund will evaluate proposals through independent review processes based on the most appropriate scientific and technical standards that take into account local realities and priorities.”67 Because PRs have found that LFAs do not always adequately consider “local realities and priorities,” the TRP and LFA relationship falls prey to the same type of bureaucratization that paralyzes solutions proffered by the World Bank and the UN. This analysis reveals that despite the Global Fund’s best intent in creating a merit-based technocracy, there is no totally neutral form of aid provision, as even PBF is still influenced by donor preferences and other measurement obstacles. Since the LFA may make recommendations that are not aligned with the spirit of the Fund’s mission, the TRP suffers in this principal-agent relationship since the grants the panel reviews have already been screened by a potentially unrepresentative LFA. Bureaucracy in the Formation of the Global Fund Once again, it is crucial to recall that the Global Fund is a multisectoral and multilateral partnership.68 Besides the bare minimum operations in Geneva to keep the Fund running, the Fund relies on local parties to implement funding. This country-specific approach is supposed to create a recipient-driven process where each country has the autonomy to implement and dictate the direction of its own projects.69 The Fund’s structure emphasizes top-down management for 67

The Global Fund to Fight AIDS, Tuberculosis and Malaria, The Framework Document, 2, 2001, accessed April 11, 2017.

68

Steve Radelet, The Global Fund to Fight AIDS, Tuberculosis and Malaria: Progress, Potential, and Challenges for the Future, 6, June 2004, accessed January 23, 2017.

69

Ibid.

Xu 24 one reason: the Global Fund was designed to avoid the bureaucratization that plagued UN funding initiatives by operating entirely independent from the UN and World Bank as “a financial instrument, not an implementing entity.”70 As evidenced from the establishment of a separate OIG investigation channel as well as additional country-specific regulatory mechanisms like the PPM, the Global Fund could not survive as solely a financial instrument for long, mainly because the endemic corruption threatened its donation streams.71 This pivot in the structure of the Global Fund to become more bureaucratic to promote accountability in light of fraudulent activity is reflective of the competing visions for the Fund in its creation. While the Framework Document outlines the final agreed upon tenets of the Fund, UN Secretary General Kofi Annan himself foresaw an institution “structured in such a way as to ensure that it responds to the needs of the affected countries and people…and it must be able to count on the advice of the best experts in the world.”72 His call for an organization where technical experts could interact with the particular needs of recipient populations sounds eerily similar to the calls of PRs asking for the Global Fund to provide local staff, potentially marking the next step in the Fund’s maturation.

An analysis of the Global Fund Framework Document can provide greater insight into the rationale and structure of the Fund as well as how much it has achieved since its inception.

Sections of the Framework found below represent the various tenets of the Global Fund mission and serve as starting points for analysis:

70

Schocken, Overview of the Global, 4.

71

Gonzalez, The First, 4.

72

Barnes, "The Global," in Partnerships and Foundations, 56.

Xu 25 The Global Fund will seek to establish a simplified, rapid, innovative process with efficient and effective disbursement mechanisms, minimizing transaction costs and operating in a transparent and accountable manner based on clearly defined responsibilities.73 This statement clarifies the emphasis the Fund places on simplicity and accountability in a nonpoliticized manner. In fact, “clearly defined responsibilities” and “effective disbursement mechanisms” rejected UN politics-as-usual and foreshadowed a technical project evaluation process now known as PBF. However, the framers were sure to “give due priority to the most affected countries and communities, and to those countries most at risk.”74 This prioritization represented a break from the prevailing country selection policy that dominated UN and World Bank health aid policy, suggesting the Global Fund in its creation was meant to be much more egalitarian than existing solutions that only gave aid to countries that implemented macroeconomic reforms in line with the Western-led order.75 However, this goal was not met. As the interview with Mr. Klumper elucidated, the Global Fund uses its zero tolerance for corruption policy as a justification to withdraw funding from one recipient country and deploy that aid in another less risky country. The idealistic egalitarianism implicit in the founding document disappeared in the actual implementation of the Fund, as a pure utilitarian calculus of monetary disbursement quantifiably achieves the Fund’s mission of improving global health care.

73

The Global Fund to Fight AIDS, Tuberculosis and Malaria, The Framework, 1.

74

Ibid., 2.

75

Radelet, The Global, 9.

Xu 26 The Framework Document reveals that at the time of creation, the role of the LFA had not been clearly defined yet, potentially signaling that the amount of auditing required for such an endeavor was unknown. It is important to emphasize that the Global Fund has existed for only fourteen years and is still in its adolescence; by establishing checkpoints in each country for oversight, the Fund is essentially adapting as it distributes funds to grow its impact and catch up to more robust multilateral institutions that also provide aid like the World Bank and USAID. Since corruption has hounded the Global Fund ever since its creation, the systems of oversight created to ensure greater accountability are part and parcel of the Global Fund’s desire to expand its reach and impact more lives even if some grants get approved more slowly in the process.

The Global Fund makes a significant positive impact on health conditions around the world. To continue its progress, the Global Fund has sacrificed certain objectives from its founding for the sake of accountability and sustained funding. This trend results in the Fund becoming more and more like the original institutions it was created to differ from, the UN and the World Bank. A simple glance at the growth in the Global Fund Secretariat supports the claim for a growing bureaucracy. The United States Government Accountability Office estimates that in 2003, there were 63 employees in the Secretariat.76 Now, in 2017, there are approximately 700 staffers, representing at a 1,011% increase in size.77 Using the principal-agent problem as a frame for evaluating the growing regulatory oversight mechanisms in the Global Fund, a case study of Nigerian fraud found that involving external observers were a necessary cost of continuing aid initiatives while an analysis of Principle Recipient perceptions of Local Fund

76

United States Government Accountability Office, Global Health: Global Fund to Fight AIDS, TB and Malaria Has Improved Its Documentation of Funding Decisions but Needs Standardized Oversight Expectations and Assessments, May 7, 2007, accessed April 11, 2017, 77

The Global Fund to Fight AIDS, Tuberculosis and Malaria, "Organizational Structure," The Global Fund, accessed April 11, 2017.

Xu 27 Agents revealed that the role of the LFA in the financing process was still ill-defined and required a more holistic assessment of project performance. LFAs should revamp their auditing process so that their metrics can factor in the particularized and often subjective and qualitative variables that affect performance in addition to the existing quantitative analysis conducted.

These changes to the Global Fund bureaucracy stem in part from the prevalence of corruption, a problem plaguing most developing country aid programs. The key question the Fund must grapple with is: while mitigating the risk of corruption is important, should that automatically make way for greater technical programmatic assistance that runs counter to the original intent of the Fund? From the survey, it appears that certain PRs may actually favor more bureaucracy if it means having access to local staff that understands technical aid operations, supporting Secretary General Annan’s ultimate vision for the Fund. These conflicting views by various stakeholders in different components of the Fund organizational chart represent a potentially major crossroad for the Global Fund in the near future: deciding whether a shift from being solely an agent for funneling donor funds to a full-service development program is in the best interest of donors. At least while it matures, it seems the Global Fund’s conundrum is that it cannot find a balance between accountability for donors and minimized bureaucracy and topdown management.

An additional characteristic to note is that the Global Fund was heralded as a depoliticized funding structure, but as it becomes more and more encumbered with red tape, can it really stay apolitical and juggle competing donor interests effectively? This raises yet another question of whether the drive towards accountability becomes a scapegoat to mask more structural problems with aid. Given the problems with effective LFA reporting, it is possible that emphasizing accountability detracts from the material care given to people afflicted by these

Xu 28 diseases in exchange for donations that rely on rosy statistics to foster political support. Further research should be done to evaluate these dual principles of maximizing impact and strengthening accountability. Future work should also propose a new framework to evaluate and propose solutions for Global Fund inefficiencies through the paradigmatic lens of the principalagent relationship. Staying vigilant in evaluating the financing mechanism of the Global Fund can make a difference for millions of lives affected by AIDS, malaria, and tuberculosis. Starting this process from a economic development framework such as the principal-agent problem provides a stable basis for analysis that can truly revolutionize how policymakers approach health sector aid in developing countries.

Xu 29 Bibliography Adebowale, Nike. "Nigeria: Global Fund to Invest N1 Billion On Health in Nigeria - Minister."

All Africa. Last modified December 13, 2016. Accessed January 16, 2017. http://allafrica.com/stories/201612140020.html.

Adebowale is a reporter for Premium Times Nigeria and summarizes and quotes the Nigerian Minister of Health as he explains Nigeria's health priorities for 2017. He specifically references the role of the Global Fund in combating AIDS, malaria, and tuberculosis in 2017. This source was helpful in understanding the official position of the Nigerian government on its interactions with the Global Fund, which it sees as a crucial ally in the fight against diseases in the country.

Akpeji, Tunde. "Global Fund May Reduce Funding to Nigeria because Some Recoverable Amounts Have Not Yet Been Repaid." Aidspan. Last modified October 1, 2015.

Accessed January 22, 2017. http://www.aidspan.org/gfo_article/global-fund-may-reducefunding-nigeria-because-some-recoverable-amounts-have-not-yet.

Akpeji is an independent journalism writing for the Aidspan GFO Newsletter, documenting recent news in Global Fund operations. His report indicates that Nigeria has failed to repay lost funding found during a 2011 audit of Nigerian PRs, marking the first time the Global Fund has had to implement its 2:1 fine policy. As a watchdog organization, this source was helpful in providing prompt reporting of the ongoing situation regarding payment in Nigeria and highlighting its significance in the context of overall Global Fund financing.

Barnes, Amy. "The Global Fund to Fight AIDS, Tuberculosis, and Malaria: Expertise, Accountability, and the Depoliticisation of Global Health Governance." In Partnerships and Foundations in Global Health Governance, edited by Simon Rushton, 53-75. New York, NY: Palgrave Macmillan, 2011.

Barnes is an Assistant Professor of Health Policy and Management at the University of Sheffield. She examines the apolitical nature of the Global Fund and contends that the performance-based funding model inherently makes the Fund subject to politicized interests. This source was particularly valuable in detailing how LFAs interact with the TRB through performance reviews as well as identifying the ramifications of the Fund's call for total accountability.

Fan, Victoria. Grant Performance and Payments at the Global Fund. Research report no. 31.

Washington, D.C.: Center for Global Development, 2013. http://www.cgdev.org/sites/default/files/Global-Fund-PBF-layout.pdf.

Fan is a research fellow at the Center for Global Development, a nonpartisan think thank specializing in economic development proposals. She aimed to test the association between grant ratings and disbursements in the Global Fund, an indication of the extent to which incentives for performance are transmitted to grant recipients. This work was especially helpful in outlining an entirely quantitative approach towards assessing Global Fund efficacy and highlighting inefficiencies in the performance indicators used by the Fund.

Xu 30 Garmaise, David. "OIG Investigation Reveals Fraudulent Activities by an SR in Nigeria."

Aidspan. Last modified May 10, 2016. Accessed January 23, 2017. http://www.aidspan.org/gfo_article/oig-investigation-reveals-fraudulent-activities-srnigeria.

Garmaise is a Senior Analyst at Aidspan, the independent NGO watchdog of the Global Fund. His report analyzes the OIG audit indicating fraud in Nigeria, providing specifics as to which sub-Principle Recipient was guilty. This source also indicates the role of the LFA spot-check in identifying financial numbers that seemed wrong, highlighting the dynamics between the LFA and the OIG. Gibson, Clark. The Samaritan's Dilemma: The Political Economy of Development Aid. New York, NY: Oxford University Press, 2005.

Gibson is Professor of Political Science and Director of the International Studies Program at University of California San Diego. He provides an extensive analysis of economic theories in developmental economics, ranging from moral hazard to the principal-agent problem. By drawing on a robust existing body of work detailing information asymmetries in the provision of aid, he indicates that inefficiencies abound in development. This source was useful in defining and finding applications of existing theoretical frameworks of economic inefficiencies.

The Global Fund to Fight AIDS, Tuberculosis and Malaria. The Framework Document. 2001.

Accessed April 11, 2017. https://www.theglobalfund.org/media/6019/core_globalfund_framework_en.pdf.

The Global Fund details its mission in its founding for tackling AIDS, tuberculosis, and malaria. This report outlines what the Global Fund envisions its role will be in the international health development space. This source was useful in providing further clarity on the origins of the Global Fund.

———. "Impact." The Global Fund. Accessed April 11, 2017. https://www.theglobalfund.org/en/impact/.

The Global Fund to Fight AIDS, Tuberculosis and Malaria documents its aid impact through a graphical representation. This source was helpful in providing a visual to represent the increase in aid impact since the Fund was created.

———. "Organizational Structure." The Global Fund. Accessed April 11, 2017. https://www.theglobalfund.org/en/staff/organizational-structure/.

The Global Fund to Fight AIDS, Tuberculosis and Malaria documents the organization's structure. This source was helpful in providing an updated estimate as to the size of the Global Fund bureaucracy.

———. Results Report 2016. 2016. Accessed April 11, 2017. https://www.theglobalfund.org/media/1122/corporate_2016resultsreport_report_en.pdf.

The Global Fund to Fight AIDS, Tuberculosis and Malaria documents the impact of its initiatives in the calendar year 2016. This source was useful in providing statistics about the Fund's continued effort to recover lost funds from fraud.

Xu 31 "Global Fund Raises $12.9 Billion to Fight AIDS, TB, Malaria." Premium Times. Last modified September 19, 2016. Accessed January 16, 2017. http://www.premiumtimesng.com/news/more-news/210725-global-fund-raises-12-9billion-fight-aids-tb-malaria.html.

Premium Times, a Nigerian news corporation, builds off of a Reuters report in documenting the amount of funds the Global Fund raised for 2017-2019. This report quotes Canadian Prime Minister Trudeau as he speaks about the importance of these donations in saving millions of lives, serving as another rallying cry for continued inflow of funding. This source was helpful as a reference for the specific amount of money raised by the Global Fund as well as pointing out that notable philanthropists like Bill Gates and Bono attended to add legitimacy to the fundraising conference.

Gonzalez, Laura. The First to Go: How Communities Are Being Affected by the Global Fund Crisis. Research report no. 4. Johannesburg, South Africa: Open Society Initiative for Southern Africa, Accessed December 16, 2016. http://www.osisa.org/sites/default/files/open_debate_4_-_global_fund_crisis_web.pdf.

Gonzalez is a freelance health journalist based in Johannesburg, South Africa and a consultant to the Open Society Foundations. She details the Global Fund's efforts around 2011, especially as it pertains to the effects of having to suspend its 11th round of funding in 2011 due to the global recession and corruption issues. This source was helpful in chronicling the final gaffe in the Fund before detailed reform efforts were taken.

Independent Communications Network Limited. "Breaking News: Nigerian Officials Steal $3.8m HIV/AIDS Money." The News Nigeria. Last modified May 6, 2016. Accessed January 16, 2017. http://thenewsnigeria.com.ng/2016/05/breaking-news-nigerianofficials-steal-3-8m-hivaids-money/.

The News Nigeria is a self-proclaimed nonpartisan reporter of Nigerian news and quotes Global Fund officials in wake of the corruption scandal regarding Global Fund aid to Nigeria. This source was helpful in providing the immediate reaction and official position of the Nigerian government after news of the scandal broke out.

Kamorudeen, Adegboyega. "Corruption in the Nigerian Public Health Care Delivery System."

Sokoto Journal of the Social Sciences 2, no. 2 (December 2012): 98-114. Accessed February 10, 2017. http://www.sjssudus.com/index.php/docman/doc_view/24-corruptionin-the-nigerian-public-health-care-delivery-system.

Kamorudeen is a lecturer in sociology at Ahmadu Bello University in Nigeria. His work examines corruption in the Nigerian health sector anecdotally, finding that the incidence of corruption significance hampers governmental legitimacy and governance over public health. This source was helpful in providing specific examples of corruption and providing a qualitative assessment of the potential causes for the prevalence of such fraud.

Klumper, Cees. "Meet The Repo Man for Global Health: Skim Off a Grant, He'll Make You Pay." Interview by Nurith Aizenman. NPR. Last modified February 9, 2016. Accessed January 16, 2017.

Xu 32 http://www.npr.org/sections/goatsandsoda/2016/02/09/466143083/meet-the-repo-manfor-global-health-skim-off-a-grant-hell-make-you-pay.

Aizenman is the Global Health and Development correspondent at NPR, and he is interviewing Klumper, the Chief Risk Officer of the Global Fund. This interview reveals much about the Global Fund's institutional priorities in providing aid, and is helpful in providing the perspective of the Chief Risk Officer regarding fraud as he is the official in charge of mitigating it.

Lauer, Krista. "New and Improved? Examining the Global Fund’s New Funding Model." Open Society Foundations. Last modified May 24, 2013. Accessed January 22, 2017. https://www.opensocietyfoundations.org/voices/new-and-improved-examining-globalfund-s-new-funding-model.

Lauer is the Project Director of the Global Health Financing Initiative of the Open Society Foundations, an international grant making organization with a strong liberal slant. Lauer presents a third party institution assessment of the changes made to the Global Fund funding mechanism in 2013, describing the new allocation of funding based on incentives in the New Funding Model. This source provides a voice outside of the Global Fund that seeks to describe and analyze the New Funding Model compared to the pre-2011 version since it will have materially impacts on Open Society Foundationaffiliated organizations implementing grant money from the Global Fund.

Obansa, S. A. J. "Health Care Financing in Nigeria: Prospects and Challenges." Mediterranean Journal of Social Sciences 4, no. 1 (January 2013): 221-36. Accessed February 10, 2017. https://tinyurl.com/lxjehqe.

Obansa is an economics professor at the University of Abuja in Nigeria who conducts a field experiment about health services funding in Nigeria. He finds that pervasive corruption impacts the Nigerian health sector significantly, and seeks to identify prospects for Nigerian health aid given these conditions. This source was helpful in quantifying the empirical extent of corruption in Nigeria health services.

Office of the Inspector General. Global Fund Grants to the Federal Republic of Nigeria. Report no. GF-OIG-16-014. May 3, 2016. Accessed January 16, 2017. http://www.theglobalfund.org/en/oig/updates/2016-05-03_Audit_in_Nigeria/.

The Office of the Inspector General published a detailed analysis of the corruption case in Nigeria, concluding that the risk management infrastructure in place in Nigeria, of which the centerpiece is the LFA, was insufficient because it failed to discover fraudulent drug pricing. This source was helpful in providing a clear case study for how the OIG audits specific countries and how the traditional LFA-PR relationship broke down in its original intent to prevent fraud.

PricewaterhouseCoopers. Building Aid Effectiveness Through Sound Fund Management.

PricewaterhouseCoopers, 2007. Accessed January 23, 2017. https://www.pwc.com/gx/en/international-developmentassistance/pdf/ida_fund_management_brochure.pdf.

PricewaterhouseCoopers documents its success as a fund manager of many global aid projects, specifically highlighting its role as the LFA for 66 Global Fund-supported

Xu 33 countries. This source is essentially just marketing material, with little to no explanation of what exactly they do in their auditing process.

ProjektHope Nigeria. "Global Fund Suspends Grant to Nigeria’s HIV/AIDS Intervention Due to Large Scale Fraud, Mismanagement and Incompetence by NACA." NigeriaHIVInfo. Last modified May 5, 2016. Accessed December 16, 2016. http://nigeriahivinfo.com/2016/05/05/global-fund-suspends-grant-to-nigerias-hivaidsintervention-due-to-large-scale-fraud-mismanagement-and-incompetence-by-naca/.

NigeriaHIVinfo.com provides news about AIDS/HIV in Nigeria as an initiative of the NGO ProjektHope to increase awareness. The source explains the conditions that led to the Global Fund suspending aid to Nigeria, namely that the National Agency for the Control of AIDS misused Global Fund resources. This source was helpful in providing a case study in which the LFA detected fraud and was able to shut down the program before the mismanagement spiraled out of control.

Radelet, Steve. The Global Fund to Fight AIDS, Tuberculosis and Malaria: Progress, Potential, and Challenges for the Future. June 2004. Accessed January 23, 2017. http://www.cgdev.org/doc/commentary/GFATM%20full%20report.pdf.

Radelet is Professor in the Practice of Development at the Georgetown School of Foreign Service, and his report details the innovative features of the Global Fund financing mechanism. His report was comparative in nature, differentiating the Global Fund from existing UN and World Bank initiatives. This source was helpful in providing me a foundation in which to analyze the differences between the Global Fund and other health care aid programs that existed before it.

Salaam-Blyther, Tiaji. The Global Fund to Fight AIDS, Tuberculosis, and Malaria: Progress Report and Issues for Congress. Washington, D.C.: Congressional Research Service, 2008. http://www.au.af.mil/au/awc/awcgate/crs/rl33396.pdf.

Salaam-Blyther is a specialist in Global Health at the Congressional Research Service.

She prepared this report for Congress in order to assess the progress of the Global Fund, and especially, what contributions US donations have made. She uses primarily data in her report detailing areas of Global Fund success as well as areas needing improvement.

This report was helpful in identifying how donor countries perceive the actions of the Global Fund and how their need to report on the Global Fund's progress may affect donation levels.

Schocken, Celina. Overview of the Global Fund to Fight AIDS, Tuberculosis and Malaria.

Research report. Washington, D.C.: Center for Global Development, 2006. http://www.cgdev.org/doc/HIVAIDSMonitor/OverviewGlobalFund.pdf.

Schocken is a visiting Assistant Professor at the University of Washington and consults on international AIDS policy issues. She provides a detailed history of the Global Fund's creation starting in 2001. By synthesizing a variety of existing official resources on the Global Fund, this source is helpful as a literature review of the developments in the Global Fund from a programmatic standpoint.

Xu 34 Shah, Sunit. The Principal–Agent Problem in Finance (a summary). N.p.: Chartered Financial Analyst Institute Research Foundation, 2014. Accessed January 16, 2017. https://www.cfainstitute.org/learning/foundation/research/Documents/principalagent_problem_in_finance.pdf.

Shah is an investment analyst at the International Finance Corporation. His summary of the principal-agent problem explained differing incentives in the context of finance, which is relevant given that aid is a form of financing. This source was helpful in providing a clear definition of the principal-agent problem.

Silverman, Rachel. "Measurement Obstacles to Achieving Value for Money at the Global Fund: A Problem Statement." Working paper, Global Health Policy Program Center for Global Development, October 2013. http://www.cgdev.org/sites/default/files/Measurement%20Obstacles%20to%20Achieving %20Value%20for%20Money%20at%20the%20Global%20Fund_0.pdf.

Silverman is a senior policy analyst at the Center for Global Development, a nonpartisan development think thank, focusing on global health financing and incentive structures.

She writes about the obstacles in quantitatively assessing project efficacy in developing countries for the Global Fund performance criteria. She uses data and anecdotal evidence to point out shortcomings in how project success is de facto determined. This source was helpful in outlining inefficiencies LFAs may face as they have to find quantitative support of project success even though the evidence may not be so clear as to perfectly fit "cookie cutter" indicators.

Tougher, Sarah. "Effect of the Affordable Medicines Facility—malaria (AMFm) on the Availability, Price, and Market Share of Quality-assured Artemisinin-based Combination Therapies in Seven Countries: A Before-and-after Analysis of Outlet Survey Data." The Lancet 380 (December 2012): 1916-26. Accessed January 23, 2017. https://tinyurl.com/mzkqvl5.

Tougher is an Assistant Professor of Health Economics at the London School of Hygiene and Tropical Diseases. Her report analyzes the effectiveness of the AMFm program in providing quality assured artemisinin drugs, finding that the Global Fund systems have enabled greater artemisinin availability in Nigeria. This source was helpful in providing an example in which bureaucratic efforts are more effective than local programs at providing the proper care for afflicted populations.

United States Government Accountability Office. Global Health: Global Fund to Fight AIDS, TB and Malaria Has Improved Its Documentation of Funding Decisions but Needs Standardized Oversight Expectations and Assessments. May 7, 2007. Accessed April 11, 2017. https://www.gpo.gov/fdsys/pkg/GAOREPORTS-GAO-07627/html/GAOREPORTS-GAO-07-627.htm.

The United States Government Accountability Office published a report about Global Fund efficacy. As a starting point, the GAO detailed the organizational structure of the Fund for accountability purposes. This source was helpful in clearly itemizing the number of staff on the Global Fund Secretariat for analysis.

Xu 35 Wafula, Frank. "Global Fund Principal Recipient Survey: An Assessment of Opinions and Experiences of Principal Recipients." Working paper, Aidspan, Nairobi, Kenya, April 2013. Accessed January 16, 2017. https://tinyurl.com/kz3r4pe.

Wafula is a research advisor at Aidspan and conducted a survey of PRs to gather their opinions about Global Fund operations and funding. Aidspan created an internet-based questionnaire to an international sampling of both governmental and non-governmental PRs, finding that most PRs had some form of dissatisfaction with the financing operations and role of actors like the LFAs. This source was helpful in providing a unique viewpoint, how PRs candidly viewed Fund operations, which therefore allows for a more direct assessment of LFA shortcomings.

———. "Procurement Cost Trends for Global Fund Commodities." Working paper, Aidspan, Nairoibi, Kenya, April 2013. Accessed January 23, 2017. www.aidspan.org/sites/default/files/publications/PQR%20working%20paper.pdf.

Wafula is a researcher at Aidspan, the independent NGO watchdog of the Global Fund.

This report provides an analysis of the Price and Quality Reporting mechanism in place in many Global Fund countries, suggesting that the trend for health commodities purchasing will continue to require greater Global Fund involvement. This source is helpful in providing both a qualitative and quantitative analysis of procurement costs trends since the PQR's implementation, thereby allowing for further investigation into the efficacy of yet another auditing tool.

Williamson, Claudia. "Exploring the Failure of Foreign Aid: The Role of Incentives and Information." Review of Austrian Economics. Accessed September 7, 2016. https://tinyurl.com/cozg6j8.

Williamson is an Assistant Professor of Economics at Mississippi State University. In this journal article, she examines foreign aid inefficiencies due to differing incentives.

She contends that market inefficiencies such as moral hazard and information asymmetry undermine the effectiveness of aid, both from a aid donor and aid recipient standpoint.

This work provides a helpful survey of economic theories explaining certain inefficiencies in the political economy of aid.

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