HARVARD TRANSITION PANEL:

Early Lessons Learned & Promising Practices-

Transitioning to NGOsWednesday, August 11, 2010

3:00-4:00PM8th Annual Track 1.0 ART Program

Meeting

Introduction: Two NGO Models: Lessons and Challenges

o John Lichten, PI/Executive Director, Harvard PEPFAR Program

Transition in Nigeria: Independent NGO Modelo Prosper Okonkwo, CEO, APIN, Ltd.

Transition in Botswana: Linked to Track 1.0 Partner Model

o Ria Madison, COO, BHP, Ltd.

Elements of Successful NGO & Challenges of the NGO Model

o John Lichten, PI/Executive Director, Harvard PEPFAR Program

Challenges of Transitiono Mark Barnes, Chair, Harvard PEPFAR Oversight Committee

Agenda

Introduction: Two NGO Models-Lessons and

Challenges

Harvard has two models: Fully Independent NGO, and NGO with Harvard PresenceFully Independent:

Governance includes no Harvard representatives PEPFAR is primary program and primary source

of revenue (i.e. Nigeria)Harvard Presence:

Governance includes Harvard representativesPEPFAR is only one of several active

programs/projectsHarvard has longstanding activities in-country

prior to PEPFAR (i.e. Botswana and Tanzania)

Transition in Nigeria: Independent NGO Model:

APIN

APIN slides

Botswana Harvard AIDS Institute BHP

Ria Madison, Chief Operating Officer

August 11, 20108th Annual Track 1.0 ART Partners Meeting

Agenda

Development of BHP IntroductionGovernancePhases of TransitionManagement Systems

Current StatusFuture Steps

Introduction and HistoryBHP – Botswana Harvard Partnership formed in

1996 between Harvard School of Public Health and the government of Botswana to conduct scientific research and provide technical assistance in the area of HIV/AIDS

Africa’s first national program to provide free ARV therapy to HIV/AIDS patients started in 2002

BHP, LLC established in 2008BHP, LLC officially started operations September,

2009Annual Operating Budget:

o 20% from PEPFARo 80% from sponsored research

Governance

Board of Members and Board of DirectorsMajority from Harvard Representation from MoH

PEPFAR Management Sub-CommitteeHRSA/CDC Review of GovernanceNext steps – develop agreement on model

Transition Workplan

Work plan development by: - Activity - Responsible Person - Status - Deadline for completion

• Categories of Activities - Finance - Human Resources

- Administration - Reporting

- IT - Grant Administration

- Governance

- Activity - Responsible Person - Status - Deadline for completion

BHP Management Systems

Review of Accounting/Financial Softward systemsReview Laboratory and asset

inventory/management systemsReview of automated payroll systemReview of internal controlsReview workflow and reporting structures –

develop new organizational designReview time & effort and expense allocation

methodology

BHP Status

HRSA ClASS Assessment February, 2010Revised and updated workplan with

corrective action for:Financial SystemsGrant administration and managementGovernance

Finalize sub-contracting and migration of financial operations

to BHP from Harvard

BHP Future Actions

Follow-up HRSA Assessment findingsRecruit key staff positionsComplete remaining transition workplan

tasksFinalize BHP Long range planHRSA Readiness Re-Assessment, Spring,

2011

Summary Elements of Building a Successful NGO and Challenges of the NGO

ModelFive Comparative Advantages for NGO success (Macro-

Level)Capacity to reach those most in need – focused service

provisionPromote local participation and implement projects in direct

collaboration with target beneficiary groupsOperate at low costsAble to be innovative, experimental, adaptive and flexiblePromote strengthening local institutions, organizations and

empower marginal groups

(Henrik Secher Marussen, “NGOs, the State and Civil Society,” Review of African Political Economy, 1996: 408).

Elements & Challenges for Successful NGO

Common Elements for Success (Micro-Level)Dynamic, strong, experienced, committed:

o CEO, COO, CFO, CIOo Senior Staffo Engaged Board of Directors

Mission and scope must be clearShort and long range plans must be

developed

Elements & Challenges for Successful NGO

Organizational Structure via Strategic Management TheoryOrganic structure/Loose Strategic Planning (great flexibility

that permits innovation and creativity, adapting to change, greater stakeholder involvement, redefine actions to best align with goals/mission)

Mechanistic structure /Tight Strategic Planning(defined rules, procedures, objectives and goals – management by objectives/outcomes)

Organic vs. Mechanistic: “indigenous” NGOs will likely depend on mechanistic but need organic structures to achieve sustainable development; need to distinguish mechanistic at the costs organic

(Irene M. Herremans et al., “Ch. 16: International New Ventures, Organization Structure, and IC Management”, 2010)

Elements & Challenges for Successful NGO

Challenges:Start-up expenses (e.g., local attorneys, local

accountants, filing fees, bank accounts, office rentals, office equipment, telecom, etc…)

Human Resources (e.g., recruitment and retention, “poaching,” maintaining morale in uncertain times)

Developing Organization Structures (e.g., policies and procedures, communications, MOUs, compliance environment, IT environment, grant administration capacity, insurance)

Solve Basic Operational Challenges (e.g., needs for operating/working capital, need for unrestricted funds, economies of scale and future funding, diversify business)

Elements & Challenges for Successful NGO

Recommendation: Track 1.0 Transition offers a great opportunity to assess optimum model/approach: NGO, FBO, Governmental Authority, and Direct Funding of Service Provider

Future Research Question: Is one model better than another in terms of providing highest quality care and continuity of services to those in need, and in terms of costs and sustainability?

Challenges of Transition CDC Country Plans and Transition RFAs

Primary objective must be to assure continuity and quality of clinical services

“Ownership” of sites by partners, governments and local NGOs must take a back seat to assuring services to clients

Uncertainty in countries about CDC transitional plans“Regionalization” during and after transition Possible CDC direct funding of local clinics, bypassing

governments and local NGOsAre Track 1.0 partners to compete with local NGOs in the

RFA process? Track 1.0 partners and local NGOs need clarity, consistency,

and predictability in transition planning in each countryHRSA and CDC in-country offices need to work together in

the development of RFAs, for consistency of approach and message

Challenges of Transition

“Gap” PeriodHRSA vs. CDC fiscal year for grant

funding“Gap” unfunded period from March 1-

July 31Carryforward funding can no longer

sustain this funding shortfallConsequences of a truly unfunded

“gap” (e.g., MDH in Tanzania, APIN in Nigeria)

Challenges of Transition Indirect Cost Disallowance for Non-U.S. Partners

Local partners have no ability to recover expenses through indirect cost recovery

Leads to great implications for impaired capital flow capacity (no cash “cushion”)

“Eliminating all Harvard ‘indirect costs’ in the process of transition will save money, with no loss to local clinical programs” – WRONG!

The costs still exist for the local NGOs, and failure to fund them will prevent effective NGO functioning

Either an indirect cost recovery mechanism for NGOs must be developed, or all “indirect” costs must be included as direct costs in NGO budgets

Challenges of Transition

Operating Capital for the Local PartnersCash flow challenges –operational

demands vs. USG funding “lags”Downside of local partner’s establishing

line of credit with a local bank is extremely high cost (exorbitant interest rates)

Few alternatives – in many cases, lines of credit may not be available at all

Consequences of failing to provide operating capital are potentially disastrous for the NGO

Challenges of TransitionManagement and Disposition of Equipment and Drugs

Drugs and supplies need to be co-mingled between Track 1.0 partner and local partner during transition period

Undesirable alternative is to keep two sets of books, and two separate supply inventories, which is increasingly complicated as site transitions accelerate

Goal is to keep costs low and supply chain logistics manageable

Forbearance needed by CDC and HRSA toward A110 requirements to achieve “sharing” mechanism.

CDC and HRSA should formally sanction this approach.HRSA and CDC need to specify process and timetable for

approving these transfers of ownership of supplies

Challenges of Transition“Indigenous control” of local entities

There is a need for greater flexibility to the requirement for local majority control of local partners

Local NGOs are answerable to many funders and regulatory requirements, not just PEPFAR:

EU, Gulf States foreign aid assistance, corporate funders, national requirements

Example of Botswana and BHP: PEPFAR represents only ~20% of BHP’s activities and funding

Harvard currently plans the BHP transition to local control to have a longer timeline than the transition of PEPFAR to BHP

If forced to adhere to strict local control requirements, the alternative is to establish a second NGO solely to satisfy PEPFAR requirements, at high financial cost and diluted staff attention

Challenges of TransitionGrants Administration Issues in Transition

Planning and ExecutionOccasional lack of understanding by some USG

staff of our serious concerns about grants management issues

Harvard staff sometimes perceived to be “making up” problems or inventing obstacles

Harvard’s goal is to discharge fiduciary obligations under cooperative agreement

We are answerable to OIG and GAO, not just HRSA and CDC

When grants administration issues are raised, it is because we see them as real problems

Challenges of Transition Close-out Funding

Partners will need some decent interval (perhaps 9-12 months of funding) to support required close-out activities

This assumes that “no cost” extensions will not be permitted

Challenges of Transition

ReportingNeed to clarify which organization

(Track 1.0 partner or transition entity) reports data elements during transition

HRSA, CDC, and government entities need to clarify how targets will be reported during “gap” period, along with adjusted targets

Thank You!