Wall Street Journal - January 30, 2012
The new chief of the Global Fund to Fight AIDS, Tuberculosis and
Malaria plans a major overhaul of operations following an
assessment urging improved management.
The assessment came after disclosures of misused funds and a
slowdown in global donations.
"There is nothing broken that can't be fixed, but there's a lot
of fixing to do," Gabriel Jaramillo, the fund's new general
manager, said in a telephone interview from his native Colombia.
The Global Fund, based in Geneva, is one of the world's largest
funders of programs and medicines to combat the big
infectious-disease killers. It has been praised for corralling
donations from more than 45 countries, as well as from private
donors such as the Bill & Melinda Gates Foundation, which on
Thursday said it is making $750 million available to the fund in
a promissory note.
Since it was formed in 2002, the group has channeled $15.1
billion to 150 countries for AIDS treatment, antituberculosis
drugs and bed nets to combat malaria. It is credited with helping
sharply reduce malaria rates in sub-Saharan Africa. Bill Clinton,
the rock star Bono, and other luminaries have lauded the fund.
But the fund, noted for its transparency, has been hurt by a
slowdown in donations and its own disclosures of management
shortcomings and some misuse of grant money - on expenses such as
an apartment renovation in India, for example, rather than
medicines. Last week, its troubles led to an announcement that
its executive director, Michel Kazatchkine, will step down in
A report it commissioned recommended an overhaul of its grant
management and financial practices and said it needs to redefine
the way it does business with recipient countries. The fund said
it is working on recovering the misspent grant money, which it
says is a small portion of its overall grant funding, and it is
implementing the recommendations.
It has also faced allegations of mismanagement, including whether
it made improper payments connected to French First Lady Carla
Bruni-Sarkozy, a fund ambassador. A spokeswoman for Ms.
Bruni-Sarkozy declined to comment. Simon Bland, chairman of the
Global Fund board, said payments for Ms. Bruni-Sarkozy's work
were made properly, but acknowledged some discord because the
board hadn't been informed about them. He added that her AIDS
campaign has "delivered some great value."
Mr. Bland also confirmed receipt of allegations of mismanagement
that were leveled privately by the fund's chief financial
officer. He said the allegations were investigated, a preliminary
report has been prepared and eventually will be made public. The
fund will draw on the report as part of a reorganization under
way, he said.
Mr. Jaramillo, 62 years old, is a retired chairman and chief
executive officer of Sovereign Bank, a Boston-based wholly owned
subsidiary of Spain's Banco Santander SA, and a specialist in
corporate turnarounds. He served on an expert panel last year
that recommended multiple changes to the fund's operations to
improve risk and grant management, visiting many programs that
receive Global Fund money.
He will take the helm on Feb. 1 from Dr. Kazatchkine and hold the
job for one year, implementing the panel's recommendations and
accepting a $1 salary.
Dr. Kazatchkine, who has been in his role for five years, said
last week that he was stepping down because he believed the
organization shouldn't have two chiefs. He didn't respond to a
request for further comment.
Under his leadership, the fund was working on improving the
financial safeguards of its grants and commissioned the report to
review its management and financial practices. Dr. Kazatchkine
endorsed the report's recommendations.
Mr. Jaramillo said he will focus on "establishing a disciplined
private-sector governance process" for managing grants, improve
risk management from country to country, and try to raise new
The fund had projected it would receive $11.7 billion between
2011 and 2013. But that amount included $2.5 billion in projected
contributions - pledges that hadn't yet been made. The amount was
"aggressive" considering the euro crisis and other economic
issues that have slowed government donations, according to one
person familiar with the Fund's operations.
The total also included a $4 billion pledge from the U.S.
government - the largest contributor to the Global Fund. But that
money is subject to annual approval from Congress. Congress has
approved $2.1 billion so far, for fiscal 2011 and fiscal 2012
In November, the fund disclosed it didn't have the money to fund
new grants until 2014, in part because of the overly optimistic
donation projections. It has received $2.64 billion from all
donors so far for 2011-2013, but expects $10 billion.
Mr. Jaramillo said he will strengthen the fund's forecasting.
"This should never have happened," he said. "Uncertainty is a
reality. You have to project the most likely scenario and the
most horrible scenario. That's what we do in business every day."
He said he hopes to hold a fund-raising conference "later in the
year" as global health organizations are calling for an emergency
Christoph Benn, the Global Fund's director of external relations,
said contributions in previous years were "very close to what we
had projected." For 2008 through 2010, the fund received $351
million more than it projected.
Jeffrey Sachs, director of the Earth Institute at Columbia
University, said money for new grants is needed urgently because
many poor countries have been preparing to scale up antimalaria
programs. "We can't leave them out on the front lines without the
armaments they need," he said.
Bill Gates said the fund's problems shouldn't discourage donors.
His foundation has given $650 million to the fund since it was
launched, in addition to its the $750 million contribution
announced last week.
"We detest the fact that some of the already small amount of aid
money earmarked for the poor is misused, but it would be
deplorable if relatively rare events of corruption were to get
more attention than the millions of lives the Global Fund has
saved," Mr. Gates, co-chair of the Bill & Melinda Gates
Foundation, said in an emailed statement. "The Global Fund is one
of the most effective ways we invest our money every year."
Write to Betsy McKay at email@example.com