The South African National Department of Health Did Not Always Manage President's Emergency Plan for AIDS Relief Funds or Meet Program Goals in Accordance With Award Requirements

Through its Global HIV/AIDS Program, CDC implemented the President's Emergency Plan for AIDS Relief (PEPFAR), working with ministries of health and other in-country partners to combat HIV/AIDS by strengthening health systems and building sustainable HIV/AIDS programs in more than 75 countries. Through a 5-year cooperative agreement (grant number 1U2GPS002062), CDC awarded PEPFAR funds totaling $2.9 million to the South African National Department of Health, the Ministry of Health (the Ministry), for the budget period September 30, 2009, through September 29, 2010.

We found that the Ministry did not always manage PEPFAR funds or meet program goals in accordance with award requirements. Of the 30 financial transactions tested, 22 transactions totaling $1.9 million were allowable, 3 transactions totaling $4,000 were unallowable because they lacked adequate supporting documentation, and 5 transactions totaling $1.4 million were related to the previous cooperative agreement and were therefore outside of the scope of our audit. Additionally, the Ministry used $74,000 of PEPFAR funds to pay potentially unallowable value-added taxes (VAT) on purchases, did not accurately report PEPFAR expenditures for this cooperative agreement on its financial status report (FSR) submitted to CDC, and did not obtain an annual financial audit as required by Federal regulations.

Our program management review showed that all three accomplishments from the annual progress report were related to the goals and objectives of the cooperative agreement. However, two of these accomplishments were missing detail to fully explain the progress made. Also, the Ministry did not submit its annual progress report to CDC within the allotted timeframe in accordance with Federal regulations.

We recommended that the Ministry (1) refund to CDC $4,000 of unallowable expenditures; (2) work with CDC to resolve whether the $74,000 of VAT was an allowable expenditure under the cooperative agreement; (3) file an amended FSR for the budget period of the cooperative agreement that we reviewed; (4) develop and implement policies and procedures for reconciling the FSR to the accounting records prior to submission, differentiating in the accounting records between CDC cooperative agreements and years within those agreements, and ensuring that it maintains adequate supporting documentation for expenditures of Federal funds; (5) use the exchange rate in effect at the time it prepares the FSR; (6) develop and implement policies and procedures for submitting the annual progress report in a timely manner; and (7) have annual audits performed and submitted in a timely manner to the applicable United States Agency. The Ministry generally concurred with our recommendations.