The Principal Recipient (PR) is required to provide the Global Fund with periodic reports concerning all funds and activities financed by the grant. Reports should be channelled through the Local Fund Agent (LFA), and copies given to the Country Coordinating Mechanism (CCM) (with the exception of the Cash Balance Report (CBR)); see below). This section of the Manual will focus on financial reporting. Guidance on overall grant reporting, including programmatic reporting is available in the reporting section of the Manual.

Global Fund policy

Exchange rate

The exchange rate to be used to report expenditures in annual financial reporting should ideally be actual exchange rates applicable on the date of payments of expenditure if known and practical, or the annual/period average exchange rate, using an official or published verifiable rate consistent with the budgeting approach and country norms.

The UN Operational Rate of Exchange (UNORE) as captured in Atlas fulfils Global Fund requirements. For grants that are denominated in Euros, the expenditures in Atlas in US dollars ($) should be translated into the reporting currency using the UNORE prevailing as of the accounting date. Assets and liabilities (cash balances and advance balances) should be translated into reporting currency using the UNORE as of reporting date.

Eligible and ineligible expenditures

Under Global Fund grants, expenditures incurred by implementers are classified as “eligible” or “ineligible”. The initial classification is usually done by the LFA and/or assurance providers (i.e. the Office of the Inspector General (OIG), internal and external auditors, country teams), with the final classification of the expenditure confirmed by the Global Fund.

Eligible expenditures are those that have been validated by the Global Fund Secretariat and/or assurance providers based on credible documentary evidence that they were in line with the Global Fund-approved budget and used solely for programme purposes consistent with the terms and conditions of the grant agreement. Eligible expenditures are:

1. incurred during the implementation period as stipulated in the grant agreement;
2. in line with the Global Fund-approved detailed budget; and/or
3. pre-approved in writing by the Global Fund prior to the expenditure being incurred.

They should comply with competitive and transparent procurement/tendering processes and the appropriate application of the relevant financial and procurement procedures. Expenditures incurred as part of approved close-out plans are considered eligible subject to the application of the grant regulations and the relevant financial/procurement procedures.

Ineligible expenditures are those expenses incurred which have been found not compliant with the signed grant agreement and/or the appropriate financial and procurement procedures of the implementer/grant. The non-exhaustive list of expenditures that could potentially be classified as ineligible by the Global Fund may include:

• expenditures for goods and services not included in the approved detailed budget;
• expenditures incurred outside of the grant implementation period, close-out period, and/or not included in an approved close-out budget;
• expenditures not duly authorized by the appropriate authority as stipulated in the Manual of Procedures and/or signature authority and approval procedure of the implementer (i.e. missing and/or wrong signatory on the payment voucher or instruction to the bank);
• prices in excess of the prevailing market prices for goods and services without proper rationale/justification;
• expenditures on services for which a report is expected but not received (e.g. headquarters’ fees, consultancies);
• fraudulent expenditures (as verified by Global Fund assurance providers), such as expenditures with falsified/fake receipts, contracts with fictitious suppliers, contracts involving collusion or nepotism between implementer and suppliers, and other procurement irregularities;
• recoverable taxes not recovered by the implementer within a reasonable period of time (six to nine months after incurring the actual expenditure); and
• use of interest income and/or other revenues (such as those from income-generating projects) by implementers to incur expenditures without the prior approval of the Global Fund.

When expenditures are initially classified as ineligible by the LFA and/or assurance providers, the Global Fund at its discretion may request additional justification from the PR and/or directly seek reimbursement from the PR. In the event the Global Fund decides to seek additional justification on ineligible expenditures, the PR has 30 days from the date of the official notification by the Global Fund (through a performance letter or a notification letter) to provide the relevant justification with appropriate supporting documents for review by the Global Fund (copying the LFA).

Upon receipt and review of the additional justification and supporting documentation, the Global Fund may fully or partially reclassify the expenditure as eligible for funding, or may confirm ineligibility. If the expenditure is confirmed as ineligible, a refund request will be communicated for the amount considered as ineligible in the grant currency, using the exchange rate applicable on the date of the original expenditure transaction or the date of first notification of ineligibility. The amount should be fully refunded by the PR directly to the grant bank account (unless specified otherwise by the Global Fund) within 60 days of notification of the reimbursement request.

Financial reporting

There are 5 main financial reports:

Annual reporting:

• Progress Update and Disbursement Request (PU/DR) (including Annual Financial Report)
• Tax Status Form
• Certified Financial Reports – produced and certified by the Office of Financial Resources Management (OFRM)

Quarterly reporting:

• Cash Balance Report
• Quarterly Expenditures Report

Financial reporting timelines are based on country classification – Tier 1, Tier 2 or Tier 3.