1. Annual Disbursement and Commitment Decisions LFA Finance Training 2013

2. What has changed: Grants are now funded by Annual Disbursement Decisions (ADD) with semi-annual reporting cycles (all exceptions need to be approved). The standard forecast is therefore 12 months and can include a buffer which may be extended from 3 months to 6 months to ensure sufficient funds are available for procurement. The disbursement decision process and the release of commitments is combined into one step. Staggered cash transfers are used to release funds to the PR. These are generally on a quarterly or semi-annual basis depending on the size of the grant and the risk context. Shift from milestone-driven monitoring to ongoing risk-based monitoring throughout the grant lifecycle.

3. Why has it changed: ADDs increase the predictability of funding and reduce the administrative burden for PRs and the GF to process large volumes of disbursement requests. Linking ADDs with annual commitments simplifies internal processes (no requests to release staggered commitments). Committing only the amount that is needed to cover the annual disbursement needs improves forecasting of uncommitted assets in the GF and increases available cash to cover additional funding needs (including the NFM). Phased cash transfers ensures better risk management - reduces cash levels in PRs accounts to support implementation and avoids dormant cash holdings.

4. How it changes: Place Annual Disbursement and Commitment Decisions: The ADD and commitment schedule should align with the progress reporting period (which in turn should be aligned with the national reporting cycle), plus the buffer period as seen in the diagram below.

5. How it has changed: Commitment amounts are approved and released at the same time as the disbursement decision is made with the adapted ADMF form. The commitment amount will be equal to the incremental funds needed to cover the disbursement amount. The Global Fund’s PBF principals will be applied when determining the ADD amount. Phased Cash Transfers: these should be used for grants where the average annual budget exceeds $3m. Single Cash Transfers: should be used for grants with annual budgets of $3m or less. Grants remaining on a semi-annual cycle will follow the same schedule and process, but with greater frequency of disbursement decisions. Timing and amount of staggered cash transfers will be established by individual CTs based on the grant risk profile and the forecasted cash transfer amounts. The PR will be notified of the approved ADD amount through a management letter, including the schedule of expected cash transfers.

6. How has it changed: There is flexibility in the timing and amounts of actual cash transfers as these can be scheduled as: –PR: Quarterly recurring, –PR: Subject to conditions, management actions or pre-approvals, –Direct payments for fiscal agents, auditors fees etc –Direct payments for procurement and VPP transfers. CTs determine if a scheduled cash transfer should be modified, stopped or postponed based on: –Low cash burn rate, –Critical risks identified during on-going grant monitoring, –Minimum Standards not being met by the PR (i.e. audits outstanding), –Actions taken in response to findings and recommendations of the OIG, –Failure to comply with conditions linked to the annual disbursement decision, –Increased cash needs due to accelerated implementation. Simple release procedure (one page approval with FPM & FO signature only)

7. Detailed Budget & Cash Needs Forecast: What is submitted from the PR: Disbursement request that covers the remaining period of the annual reporting period (i.e. remainder of the program year). Detailed forecast (a Cash Requirement Forecast of 12 months plus buffer). Schedule of when the cash is needed split by quarters Cash Requirement Forecast: The template is given as guidance, the format and the level of details to be refined by CTs; Should be based on latest revised workplan & budget and take into account spending patterns Level of details and depth of review depends on risk, absorption rates, material historical revisions If good forecasts already submitted, adapt for additional information if necessary CTs will evaluate the annual forecast, considering absorption rates, overall performance and capacity of the PR, the risks and mitigation measures before recommending an ADCD amount.

8. Changes to the Grant Agreement: For those grants that have transitioned, the Grant Agreement and related documents have been amended through an IL. The ILs have been counter-signed by the PR prior to the commitment decision being made. The IL updates, at a minimum, the following: –Face Sheet –Performance Framework –Annex A Updating “Anticipated Disbursement Schedule” and “The Global Fund Staggered Funding Commitment Policy”, Conditions revisions for grants with PUDRs NOT processed in Q1 of 2013. If a Board condition needs to be modified for the transition, EGMC approval is required. All other conditions that were tied to the previous disbursement cycle must be reviewed by the CTs and should be modified, if needed, to be: –time-based with specific deadlines –a condition precedent to annual disbursement decision, or –a condition precedent to the use of funds

9. What is the impact on the LFA? For those grants that have transitioned to ADCD: –The disbursement requests are submitted by the PR annually rather than every 6 months. –The PR’s PUDR includes a 12 month forecast plus, if applicable, a buffer that will range from 3 to 6 months. LFA now reviews a minimum 12 month forecast and makes recommendations on the following: –What the PR can feasibly implement taking into account the PR’s programmatic performance rating, burn rate and associated risks (OIG issues, CP/SCs unfulfilled, audits outstanding etc), –Verification of opening cash balances and commitments, the recommended disbursement amount and when the PR should theoretically require cash transfers stating the individual amounts and expected timing. During the implementation period of the approved ADMF, the CT may request the LFA to confirm the following: –PRs absorption of funds / bank account balances and outstanding commitments, –Outstanding CP/SCs holding up cash transfers have been fulfilled.