Office of the Inspector General

Audit of Global Fund’s Procurement and Supply Chain Management

22 May 2015

Office of the Inspector General (OIG) auditors found that procurement and supply chain management at the Global Fund were generally effective in supporting the organization’s mission to end HIV, tuberculosis and malaria. The Global Fund has re-engineered its procurement operating model and its Sourcing Department has been strengthened significantly over the past two years. However, the Secretariat’s procurement strategies need to be supported by a stronger internal control framework, which includes resources, policies and procedures, tools and systems to support the effective implementation of its activities.

Efficient and effective procurement and supply chain management are fundamental to the Global Fund’s fight against the three diseases. The Global Fund’s biggest investments at country level concern health product procurement (estimated at 40% but as high as 90% for some grants). In 2013, the organization spent an estimated 67% of overall grant disbursements (US$ 2.2 billion) on procurement and supply chain management related activities. The Global Fund has successfully prioritized procurement for core HIV and malaria health products which make up the biggest spend.

Over the past 18 months, the Global Fund has increased significantly direct control of procurement from US$ 200 million in 2012 to US$ 1.2 billion in 2013. This has contributed to shorter lead times, reduced costs for bed nets and artemisinin-based combination therapy as well as overall savings. These strategies have also lowered agency costs, increased ownership of supplier relationships, improved funds flow to procurement agents and stabilized supply levels. A pooled procurement mechanism, introduced in 2007, also gives the Global Fund a wider mandate to help Principal Recipients in country to buy health products more effectively and efficiently.

However, the audit also found that internal controls at the Secretariat to support procurement and supply chain management were not yet optimal. Roles and responsibilities are split between two divisions, Grant Management and Finance, which makes it difficult to plan effectively and deliver products on time to countries. The OIG also found financial controls over the pooled procurement mechanism were inadequate and was unable to validate the accuracy of the reported performance results. The Secretariat’s procurement policies and procedures, tools and systems to support its own operational needs also require strengthening.

The Global Fund has put in place measures that are expected to address the issues noted in the audit including an update of procurement policies, the implementation of a pooled disbursement mechanism for procurement agents and a reviewing and clarifying roles and responsibilities in Geneva.

  • Procurement and Supply Chain Management at the Global Fund (GF-OIG-15-008 - 22 May 2015)
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The Office of the Inspector General works to ensure that the Global Fund invests the world’s money in the most effective way possible in the fight against AIDS, tuberculosis and malaria. Through audits, investigations, oversight and consultancy work, it makes objective and transparent recommendations to promote good practice, reduce risk and condemn abuse.

Established in 2005, the Office of the Inspector General is an independent yet integral part of the Global Fund. It is accountable to the Board through its Audit and Ethics Committee and serves the interests of all Global Fund stakeholders. Its work conforms to the International Standards for the Professional Practice of Internal Auditing and the Uniform Guidelines for Investigations of the Conference of International Investigators.

The Office of the Inspector General believes that every dollar counts and has zero tolerance for fraud, corruption and waste. Through its whistle-blowing channels, the Office of the Inspector General encourages all to come forward to point out any irregularities that prevent Global Fund resources from reaching those who need them.