Office of the Inspector General

Follow-up Audit of Procurement Processes

03 September 2018

Material improvements have been made in various aspects since the OIG Procurement and Supply Chain audit in 2015. New indirect procurement regulations and procedures have been designed, including controls to enhance competitiveness and transparency, and staff have been trained in these new processes. However, the framework is not yet fully embedded and compliance issues remain on tendering and competition. There is a need to enhance compliance monitoring and the design of some aspects of the framework.

Closer management and improved oversight have been implemented over Procurement Service Agents (PSAs) and other suppliers, and a market shaping strategy has been approved by the Board. However, given changes in market conditions, there is a need to reassess the 2006 decision to directly source all Multi Drug Resistant TB drugs from the Global Drug Facility (GDF), a pooled procurement mechanism used by the Global Fund. Despite the formalization of the arrangements in a memorandum of understanding (for the procurement of medicines and diagnostics for tuberculosis), the performance management framework and reporting activities for GDF procurements have not been established. This is also a repeat issue which had been highlighted in the previous OIG audit. Overall, while the management of PSAs has improved and is partially effective, the reassessment of GDF relationship and establishing procurement and reporting activities are significant issues.

Oversight and performance management of direct procurements (Procurement Service Agent – PSA services) has improved with follow-up and tracking of agreed actions. However, there is a need to incorporate performance monitoring measures in the contracts. The management of indirect procurements (non-health related corporate purchases) also needs a more structured and risk-based approach.

Data for reporting on key performance indicators has improved, and methodologies for reporting and interpreting these KPIs have been enhanced. In early 2018, a revised performance reporting framework was launched to further improve the KPIs; however, one strategic KPI remains unreported due to data limitations. While solutions are being explored, the strategic procurement KPIs continue to be based solely on Pooled Procurement Mechanism procurements, which account for approximately 50% of Global Fund health products.

The audit did not include or rate the organizational structure over procurement activities, and staff capability and capacity. Whilst the 2015 audit had identified gaps in these areas, the Secretariat has acknowledged that remediation of these gaps is still a work in progress and therefore these areas were not ready to be re-evaluated.

  • Procurement Processes Follow-up Audit (GF-OIG-18-018 - 3 September 2018)
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