GOOD NEWS AND BAD NEWS AS THE GLOBAL FUND RETURNS TO

UNCLAS SECTION 01 OF 02 KAMPALA 000523

C O R R E C T E D COPY///ADDING SENSITIVE CAPTION///

DEPARTMENT PASS TO MCC (CHAKA)
DEPARTMENT FOR S/GAC
DOJ FOR ICITAP (TREVILLIAN, RODERICK, BARR, AND RAUCH)

SENSITIVE
SIPDIS

E.O. 12958: N/A
TAGS: PGOV PHUM EAID KCOR KHIV UG
SUBJECT: GOOD NEWS AND BAD NEWS AS THE GLOBAL FUND RETURNS TO
UGANDA

Ref: Kampala 444

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1. (SBU) Summary: The Global Fund to Fight AIDS, Tuberculosis and
Malaria is poised to resume disbursement of funding for previously
approved grants in Uganda that for the most part have been on a
three-year hiatus caused by the illegal diversion of Global Fund
monies in 2005. The resumption of funding comes at a good time in
that Uganda is facing, yet again, a potentially disastrous stock-out
of life-saving drugs, including anti-retrovirals to treat HIV/AIDS.
At the same time, we are deeply concerned about the Government of
Uganda's passivity and inability to take the lead in fighting
HIV/AIDS. As donors continue to willingly shoulder most of the
resource burden and repeatedly come to the rescue when the
Government mismanages, we are perpetuating donor dependence and
perversely undermining good governance and accountability in Uganda.
End summary.

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Background: Global Fund's Long Hiatus from Uganda
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2. (SBU) The Global Fund to Fight AIDS, Tuberculosis and Malaria
ceased disbursing funds in Uganda in late 2005 after revelations
that various Government of Uganda (GOU) agencies and civil society
organizations may have diverted $1.5 million of Global Fund monies,
either for personal gain or to finance partisan efforts to win
approval of the referendum the previous year that eliminated
presidential term limits. In response, Ugandan President Yoweri
Museveni established a Commission of Inquiry, which conducted a
ten-month investigation into the scandal. Although the inquiry was
presented to President Museveni in May 2006, the Government White
Paper on the Judicial Commission of Inquiry into the Alleged
Mismanagement of the Global Fund was not issued until November of
that year. It stated that the Ministers of Health and Finance would
not be held accountable, only technicians and it requested that
funds be made available to the Criminal Investigation Department
(CID) and Department of Public Prosecution (DPP) to investigate and
prosecute. However, the GOU did not make funds available for
investigations until nearly two years after the inquiry was
submitted to President Museveni, seriously diminishing the chances
for good investigation and successful prosecution. Nearly three
years after the scandal broke, police investigations began,
culminating in the recent successful prosecution of two minor
figures in the scandal (see reftel). Under pressure from donors,
the Global Fund also appointed its own Inspector General (IG) to
carry out an investigation. Although the Global Fund created the IG
position in 2005, the person appointed, John Parsons, did not visit
Uganda until 2008.


3. (U) IG Parsons is reportedly almost ready to submit his final
report to the Global Fund Board on the response of the GOU to the
scandal and on the adequacy of the so-called Long Term Institutional
Arrangements (LTIA),a complex set of interagency fiduciary
procedures put in place after the scandal to protect the integrity
of donor-provided funds in the health sector.

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Uganda Faces Life-Threatening Drug Shortages
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4. (SBU) In a separate-but-related development, Uganda again faces
imminent shortages of life-saving anti-retroviral and other drugs.
The GOU has known since the end of 2008 that a potential stock-out
of antiretroviral drugs was imminent. This was reaffirmed at the
end of January. The GOU response has been at best piecemeal and we
are unable to verify whether the Ministry of Health has sufficient
safeguards in place to ensure a continuous supply of drugs to those
currently enrolled. The Ambassador and Charge d'Affaires (CDA) have
written to the Minister of Health twice, in April and May, to convey
the message that the USG, through PEPFAR, is no longer in a position
to bail out GOU programs facing stock-outs given our own budget
constraints and the need to maintain the integrity of PEPFAR
programs and the health of their clients. We further emphasized our
concern about the GOU's management of ARVs in Uganda. As it is now,
PEPFAR funds 80% of the total effort to fight HIV/AIDS in Uganda,
and pays for the ARVs of 95,000 of the 175,000 Ugandans who now
receive them.

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Global Fund: We're Back!
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5. (U) In this context, the CDA met May 13 with a Global Fund team
led by Fareed Abdullah, Global Fund Director for Africa. Abdullah's
team met separately in the week with the PEPFAR Coordinator and the
Director of Improved Human Capacity at USAID/Uganda. Abdullah told

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the CDA and other donor Chiefs of Mission that there would be no
final official decision until after his visit, but that Global Fund
would very likely resume funding to Uganda "within weeks, not
months." The IG's report into the scandal is still pending
completion of an ancillary report in the readiness of the LTIA to
manage Global Fund monies. Abdullah made it clear, however, that it
was the Global Fund Secretariat's prerogative to resume funding or
not, independent of the IG's final conclusions. He said the
Secretariat believes that it is time to move on, put the scandal
behind it, and begin to alter the perception that the Global Fund is
unwilling to provide funding to Uganda.


6. (SBU) Abdullah said that there will be renewed vigor and
vigilance on the part of the Global Fund in overseeing its programs
in Uganda and that it will continue to press the GOU hard for
recoveries and prosecutions. Abdullah was sanguine on preventing
future theft, noting that a large-scale diversion of funds at the
central level in the future is unlikely because the issues are
isolated and are more likely to occur at the decentralized level.
The expectation is that the Long-Term Institutional Arrangements
will be used in the next disbursement of Round 7 resources; however,
the IG report on the LTIA is still pending. Given the GOU's poor
track record in managing many of the existing systems and
structures, it is not clear how successful the LTIA will be.


7. (SBU) In terms of funding, the Global Fund will turn on three
different spigots in Uganda in the coming weeks:

-- Round 6 for Tuberculosis; this is an ongoing grant, the third
disbursement request is being planned; however, there are
outstanding reporting issues on activities performed to date.

-- Round 4 for malaria; was renewed and signed two weeks ago for
$71 million; Global Fund is waiting for Uganda to submit a
disbursement request.

-- Round 7 for HIV/AIDS and malaria; the first tranche of Round 7
funding will amount to $23 million for ARVs, according to Abdullah.
This will be disbursed quickly in light of the dire shortage of ARVs
in Uganda. To hasten disbursement, the Global Fund plans to waive
its requirement for the appointment of a new procurement agent, and
instead use a procurement agent used in earlier procurements.

Note: Round 3 for HIV/AIDS ended in December 2008 with remaining
unspent funds. The Global Fund decided not to sign a Continuation
of Services agreement, an emergency procedure to deliver life-saving
services, since the previously-signed Round 7 will accomplish the
same function.

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Good News or Bad News? Both
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8. (SBU) Other donor representative in attendance on May 13 spoke
at length about corruption and the need to follow-up prosecutions
and recoveries in the Global Fund scandal. The CDA touched on the
broader issue of ownership, noting that while the U.S. is relieved
that the Global Fund will be able to address the ARV stock-out in
the short-run, we are also very concerned about the GOU's
longer-term inability and unwillingness to lead on the issues of
proper management of donor funds, and more broadly, successful
planning and implementation of the GOU's own strategy to fight the
HIV/AIDS pandemic. The GOU's recent actions (or lack thereof),he
noted, indicate the GOU is irresponsibly ceding responsibility for
fighting HIV/AIDS to donors like the U.S., the Global Fund, and
others.

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Comment: Caught in Our Own Trap
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9. (SBU) In theory, the Global Fund's return to Uganda is good news,
both in the short-term because money is needed now to buy
life-saving drugs, and in the long-term because our own programs
like PEPFAR cannot indefinitely carry the burden of fighting
HIV/AIDS in Uganda. We need the Global Fund as a partner and our
efforts are complementary. At the same time, we remain deeply
concerned over the lack of political will and initiative on the part
of the GOU to lead the way and contribute meaningfully in an area
that is so clearly a public responsibility. In this and other
areas, years of steadily growing donor inflows appear to be having a
perverse impact by diminishing the need for Uganda's leadership to
govern well and provide essential services to its citizen.

HOOVER