17.02 Programme Funding Agreement (PFA)


Programme Funding Agreements (PFAs) are contractual arrangements designed to provide a legal framework to support activities carried out by partners of UNAIDS. They are used only where the activities to be funded will help achieve UNAIDS objectives, outcomes and outputs included in the UBRAF. PFAs may thus be seen as a form of partnership in the pursuit of common objectives between the UNAIDS Secretariat and the entity whose activities are being funded. 

The purpose of a PFA is not to purchase supplies or hire services for UNAIDS, but rather to direct UNAIDS funds to support activities of other entities that are in accordance with the UNAIDS’ priority objectives.

The very nature of the programme funding “partnership” waives the requirement for competitive bidding. Instead, UNAIDS seeks to ensure that the purpose of the funding falls within UNAIDS priorities, that PFAs are only arranged with fully capable and eligible partners (please refer to PT.17.5), and that allocated funds are properly spent and tracked. 

Requests for PFAs originate from the entity that is to be funded rather than with the UNAIDS Secretariat. 

PFAs are exclusively concluded with non-profit organizations. The requesting parties under PFAs are intergovernmental organizations, non-profit non-governmental organizations and non-profit academic institutions. 

The product of any work undertaken under PFAs does not become the property of UNAIDS.

Criteria applicable to PFAs

Several important criteria are applicable to PFAs.
  • The purpose of PFAs must fall within the priorities of UNAIDS. Responsible officers must substantiate that these agreements directly contribute to the implementation of their work plans.
  • The contracting partner must be eligible to partner with UNAIDS, and it must be capable—in terms of technical, financial and administrative competence—to fulfil its responsibilities under the PFA.
  • Since a best value at lowest cost approach is not substantiated through a competitive bidding exercise for PFAs, budgets must be particularly detailed, with all costs justified and compared to acceptable local market rates.
  • The extent to which UNAIDS will be involved during the implementation of the activities proposed by the requesting party must be fully described in the proposed agreement. For example, UNAIDS should be consulted on participation in training events that it accepts to cosponsor, and/or it should be given the opportunity to review and propose amendments to reports or other documents that it funds (even in part). 
  • For complex projects involving multiple activities over a period of time, the activities should be detailed in a project document to be attached to the PFA. This project document will form an integral part of the agreement. 
  • Eligible expenditures under PFAs are normally limited to direct costs related to the implementation of proposed activities. Standard administrative support costs, however, may be reimbursed in special circumstances for non-governmental organizations (e.g., in low- and middle-income countries where there is an element of institutional capacity-building in the projects concerned). In such cases, the inclusion of an administrative support costs element must be justified in writing.
  • Financial and substantive reporting is mandatory, regardless of the amount of the agreement.
  • Adequate controls are required in the PFA to ensure that UNAIDS has the power to influence the implementation of the contract activities if performance is not satisfactory. This can include, for example, provisions for consultation between the parties and, if necessary, amendment, suspension or termination of the PFA, as well as provision for the settlement of disputes. 
  • No activity pertaining to a PFA may be initiated prior to receipt of a countersigned copy of the PFA. 
The nature of the agreement will determine if it falls within the category of a contract for the acquisition of supplies or services, or a non-commercial contract. 

The following examples illustrate the difference:
In the first scenario, a non-governmental organization or an academic institution has designed and is conducting specific outreach programmes for targeted groups in a specific region of a country. It contacts UNAIDS to seek financial support to expand these activities to other regions. UNAIDS decides to provide funds to the non-governmental organization or academic institution to support this outreach programme, which is in line with a priority objective of UNAIDS’ UBRAF. In this instance, the proper contractual arrangement would be a PFA.

In the second scenario, UNAIDS is planning to replicate the same programmes in another country. For this purpose, UNAIDS seeks the services to provide the venue for the outreach programme, to organize the travel and accommodation of the participants, and to supply overall organizational and logistical support. In this case, UNAIDS would be the requesting party and would follow competitive bidding process following procurement rules of commercial contracts. 

General conditions governing Programme Funding Agreements

The following general clauses should always be included in a PFA, except as otherwise noted below. 
  • Neither this Agreement nor the implementation of activities under this Agreement will create any employer/employee relationship between UNAIDS and (name of the entity being funded), or any of its employees. (Name of the entity being funded) shall be solely responsible for the manner in which work on the project is carried out. UNAIDS shall not be responsible for any loss, accident, damages or injury suffered by (name of the entity being funded) or any of its employees or agents or by any other person whatsoever arising in or out of the implementation of the activities being funded under this Agreement. 
  • The final technical report and financial statement required shall be submitted upon completion of the implementation of the activities being funded under this PFA and, at the latest, within 90 days of the normal date for completion. 
  • Any dispute relating to the interpretation or application of this PFA shall, unless amicably settled, be subject to conciliation. In the event of failure of the latter, the dispute shall be settled by arbitration. The arbitration shall be conducted in accordance with the modalities to be agreed upon by the parties or, in the absence of agreement, with the Rules of Arbitration of the UN Commission on International Trade Law (UNCITRAL). The parties shall accept the arbitral award as final.

Acknowledgements

The acknowledgement that UNAIDS expects to receive in return for its financial contribution should be stipulated in the PFA. The type and degree of acknowledgement requested by UNAIDS will vary depending on (1) the amount of UNAIDS’ financial contribution; (2) whether the activity being funded is high-profile; and (3) whether UNAIDS is exercising any technical oversight of the project.

For example, in the case of the partial funding of a non-governmental organization newsletter, UNAIDS would probably ask that its financial contribution be acknowledged on the inside cover. For a more high-profile project, UNAIDS may wish to seek more visibility for its involvement, including authorizing the use of its logo (please refer to 10.1: Overview for more on the use of the UNAIDS logo).

Types of PFAs

Financial contribution to a technical project

In cases where UNAIDS partially funds high-visibility projects (e.g., an HIV-prevention campaign featuring high-level media figures), it will normally retain some technical control over the project. This is done to ensure that the final outcome is consistent with the objectives of the Joint Programme. The degree of technical control to be exercised by UNAIDS should be clearly stipulated in the PFA (e.g., whether progress reports are to be submitted to UNAIDS, whether the project is to be amended on the basis of technical feedback from UNAIDS staff, or whether the final report of the project is to be cleared through—or simply submitted—to UNAIDS). See the sample PFA in the “Relevant templates” section at the end of this chapter.

Financial contribution to a publication or newsletter

In the case of partial funding of a book or other major publication, UNAIDS should normally retain the right to clear the text of the publication before going to press. The PFA, therefore, should clearly state this. The original proposal from the contractual partner should specify in some detail the purpose, aim and scope of the publication. This will enable UNAIDS to verify that its expectations have been fulfilled when it clears the final draft.

In cases where a publication is in its final stages and UNAIDS has been approached for funding to cover publishing costs, it may not be feasible to clear the text before it goes to press. In these cases, the PFA should stipulate that a disclaimer be inserted in the book to the effect that the views expressed do not necessarily represent the official policy of UNAIDS. 

In the case of the partial funding of a non-governmental organization newsletter, UNAIDS does not clear the content of the newsletter or exercise any editorial control over the articles that appear.

Financial contribution to a meeting or workshop

On occasion, UNAIDS will partially fund meetings organized by outside institutions, provided that the meeting topics and objectives are in line with UNAIDS’ priorities and objectives.

In such cases, the funds provided by UNAIDS may be used to cover some or all of the following:
  • the travel costs of participants from developing countries
  • a daily allowance for meeting participants for the duration of the meeting
  • the costs of publishing meeting reports and other material
  • stationery
  • rental of meeting rooms and equipment for the meeting
  • photocopying and communication costs
  • other relevant local costs (provided these are specified and justified). 
A detailed breakdown of meeting costs that itemizes each budget item should be prepared by the meeting organizers for approval by UNAIDS. The support of UNAIDS must also be duly acknowledged in any materials related to the meeting or workshop.

UNAIDS could request a detailed report of the sponsored meeting.

Financial contribution without co-sponsorship

UNAIDS often gives small amounts towards the cost of a workshop or seminar without seeking active involvement in the agenda or a list of participants. The PFA should stipulate that UNAIDS’ support is to be duly acknowledged in any materials related to the meeting or workshop. If UNAIDS does not co-sponsor the conference, the use of the UNAIDS logo is not authorized (see the sample PFA for funding meetings without co-sponsorship included in the “Relevant templates” section at the end of this chapter).

Financial contribution with co-sponsorship

In the case of larger conferences or high-visibility meetings, UNAIDS often agrees to co-sponsor the meeting. Co-sponsoring implies UNAIDS’ active involvement in the agenda and list of participants. The PFA should stipulate that the words “co-sponsored by the Joint United Nations Programme on HIV/AIDS” be included on materials related to the meeting. Use of the UNAIDS logo remains subject to specific authorization. 

UNAIDS’ conditions for co-sponsorship should be included as an Annex to the agreement; these conditions will form an integral part of the PFA. 

Structure of Programme Funding Agreements

The structure of the PFA will depend on the duration and complexity of the activities to be funded, as well as the degree of UNAIDS’ technical participation in the activities.

Basic PFA

PFAs are specific to UNAIDS in accordance with its mandate, and they are tailor-made agreements. 

PFAs used for funding activities over the short term are relatively simple. They take the form of a signed letter from the officer responsible for the contract in UNAIDS, with sufficient delegation of authority, to the head or other responsible officer of the entity to be funded. This letter sets out the conditions under which funding will be granted. The letter will request the recipient to signify the entity’s consent to these conditions by signing and returning a copy of the letter. (Sample Programme Funding Agreements are provided in the “Relevant templates” section at the end of this chapter).

PFA with project document

Where funding activities are of a longer duration and a more complex nature (such as institutional capacity building), it will be necessary to detail these activities in a project document to be attached to the PFA. The project document will then form an integral part of the PFA. 

A well-designed project is usually characterized by a logical, complete project document. The project document should be as clear and detailed as possible with an itemised budget breakdown; this will enable the contractual partner to implement the project in accordance with the instructions on the document. It also will allow UNAIDS to assess, in accordance with clear criteria, whether the work is performed properly.

The project document should be attached to the PFA as an Annex.    A project document funding proposal guideline has been developed to assist outside institutions with the preparation of project documents for review by UNAIDS. Please refer to PT.17.4 Guideline on preparation of a project document for PFAs on how to prepare a substantive and detailed proposal.

The project document provides a rigorous legal framework, and it allows for a clear and formal statement of the activities to be funded, the technical and financial reporting requirements, and the respective roles of the funded entity and UNAIDS. 

Like any other project agreement, a PFA of this kind may involve an element of procurement or personnel costs. However, this is only incidental to the programme funding nature of the project and it is not the central objective of the project agreement (as that would be covered under a contract for the acquisition of supplies or services). Thus the PFA, through the project document, may exceptionally provide for the purchase of equipment within the scope of the project, but this will be only when such equipment is to be used in the implementation of the project. It is not meant to be a way to acquire equipment for UNAIDS or for the funded entity’s office use. 

Additional conditions governing Programme Funding Agreements

The following conditions should be considered and should form a part of a PFA, where applicable:
  • The funds provided by UNAIDS may only be used for the project in accordance with the agreed budget, and any unspent balance under the agreement must be returned to UNAIDS.
  • The funded entity will have primary responsibility for the implementation of the project in accordance with the terms of the agreement.
  • The respective roles of the funded entity and UNAIDS must be clearly indicated.
  • A mechanism must be established to allow for consultation between the funded entity and UNAIDS during the implementation of the project.
  • Technical and financial reports should be linked to deliverables, and the financial reports are subject to audit.
  • The funds to be provided by UNAIDS will be transferred in instalments, with payments being linked to the timely submission and approval of technical and financial reports.
  • Procurement of supplies and equipment for the project is handled by the funded entity, which is responsible for ensuring that contracts are awarded after due assessment of competitive bids. 
  • Ownership belongs to the funded entity upon delivery. At the end of the project, the funded entity is required to provide a detailed report of all purchased assets. UNAIDS, however, reserves the right to claim ownership in case of early termination of contract or due to non-satisfactory performance. 
  • Insurance coverage of any project equipment is the responsibility of the funded entity.
  • There is no employer/employee relationship between staff of the project and UNAIDS, and UNAIDS is not liable for any damages arising under the contract.
  • Either party may rescind the agreement in case of a serious violation of the terms of the agreement by the other party. UNAIDS shall have the right to rescind the agreement if, in the judgment of UNAIDS, the project is being implemented in such a way as to no longer contribute to the objectives of UNAIDS.
  • Modalities for settling disputes are set out.

Preparation of Programme Funding Agreements

PFAs share some common elements with contracts for the acquisition of supplies or services, these are as follows.
  • The need for a detailed description of what is expected from the UNAIDS partner within the Contract or PFA (TOR or project description), including the scope of the contract/agreement, its time frame, the reporting requirements and reporting schedule.
  • A detailed budget broken down by item, together with technical and financial reporting requirements and a payment schedule. 
  • The need for UNAIDS to manage/monitor the Contract/PFA. This includes the possibility for UNAIDS to amend the Contract/PFA, or to suspend or terminate it altogether in case of unsatisfactory fulfilment of its obligations by the contractual partner.

Terms of Reference or Project Document

Since the requesting party under a PFA will be a partner seeking full or partial financial support from UNAIDS for an activity, this partner will be responsible for the preparation of a detailed request for the PFA. When receiving such a request, the first concern of UNAIDS will be to ensure that the proposal directly contributes towards implementation of the objectives of the UBRAF.

UNAIDS will also be responsible for ensuring that the PFA and its attachments follow the standard UNAIDS format and that it includes the following information:
  • the rationale for the funds and the immediate and/or long-term objectives of the PFA;
  • the expected output and beneficiaries;
  • a detailed description of the proposed activities, including inputs and outputs;
  • a detailed plan of work, including the time schedule and overall time frame;
  • a detailed budget;
  • management responsibilities and the institutional framework;
  • the role of UNAIDS in the implementation of the project;
  • reporting requirements, including reporting schedules and monitoring/evaluation mechanisms for the proposed agreement;
  • provisions for suspension or termination;
  • provisions for amendment;
  • the use of the UNAIDS logo by the UNAIDS partner (where appropriate); 
  • the return or use of unused funds upon completion of the activities;
  • the audit mechanism; and 
  • settlement of disputes.
Please refer to PT.17.04 Guideline on preparation of a project document for PFA on how to prepare a substantive and detailed proposal.

Budget preparation

The responsibility for the preparation of a detailed budget belongs to the partner seeking UNAIDS funding or co-funding. However, UNAIDS is responsible for ensuring that the budget is fully detailed and that it includes all inputs to be funded or co-funded by UNAIDS.

The budget should be itemized and include such items as: 
  • staff costs
  • travel and per diem costs
  • supplies (such as stationery)
  • training costs
  • rental of meeting rooms or equipment
  • communication and reporting costs.
An institution seeking funding from UNAIDS may provide both its own contribution and that received from other organizations. In such cases, it should provide a detailed breakdown of all contributions using the same format as well as the budget items to be sponsored by UNAIDS. The proposal should include the names of other sponsors of the project and the respective contribution amounts.

Since the concept of best value at lowest cost is not substantiated through a competitive bidding exercise for PFAs, budgets must be particularly detailed, with all costs justified and compared to acceptable local market rates and/or agreed UN rates. Travel costs should be based on the least expensive economy ticket available and per diem rates should not exceed the equivalent of the standard UN per diem authorized at the travel location.

Communication and related costs should be budgeted based on realistic costs.

Eligible expenditures under PFAs are normally limited to direct costs related to the implementation of proposed activities. Administrative overheads and recurrent operational costs may only be financed in exceptional circumstances and upon written justification.

Payment schedules 

UNAIDS should establish technical and financial reporting schedules that will serve as a basis for payment schedules. Both schedules should be linked to the delivery of specific outputs and, together with the budget, should form an integral part of the agreement.

The amount of advance payments allowed will depend on deliverables and on the nature of the project. 

Advance payments may be justified where substantial up-front payments are required (e.g., financing participants’ travel and meeting costs). Initial payments above 50% of the total amount must be explained and justified in writing and approved by the Director, Planning, Finance and Accountability Division. Advance payments of 100% should be avoided regardless of the total amount in question.

The last payment for PFAs should be at least 10% of the value of the agreement and be made upon satisfactory completion of the work, receipt and acceptance of the output/final report and financial statement by UNAIDS. 

Financial reporting is mandatory for PFAs, irrespective of the amount. 

Funds may not be used for any purpose other than that requested in the proposal. Any unused funds must be returned to UNAIDS. 

Arbitration

PFAs should provide for arbitration in accordance with the rules of the United Nations Commission on International Trade Laws (UNCITRAL).

The following wording should be used in all PFAs:
“This Agreement shall be governed by general principles of law to the exclusion of any single national system of law. Any dispute relating to the interpretation or execution of this Agreement shall, unless amicably settled, be subject to conciliation. In the event of failure of the latter, the dispute shall be settled by arbitration. The arbitration shall be conducted in accordance with the modalities to be agreed upon by the Parties, or, in the absence of agreement, with the rules of arbitration of UNCITRAL. The parties shall accept the arbitral award as final.”

Contract  Management 

Regular contract monitoring

A PFA effectively establishes a partnership between UNAIDS and another institution for the implementation of defined activities that requires substantive monitoring by the officer responsible for the Agreement.

The description of the PFA contains a series of milestones that are linked to the achievement of specific objectives and the completion of planned activities. This should be reflected by the submission of progress reports to UNAIDS according to an established calendar. These milestones should be linked to the payment schedule that, in turn, should be based on a financial reporting schedule.

Adequate controls are required in the PFA to ensure that UNAIDS has the capacity to influence the implementation of the agreed upon activities. These controls can include provisions for regular consultations between the parties, review of final drafts, etc.

If these requirements are followed, the officer responsible for the contract will be in a position to initiate consultations with the UNAIDS partner as soon as there is slippage in the implementation of the PFA, or if the outputs do not correspond to the requirements of the PFA. 

Reporting requirements

Accountability for the implementation of activities, proper use of funds, and the involvement of UNAIDS during implementation in a manner that complies with provisions made in a PFA fall under the responsibility of PFA signatories (i.e., Directors and Chiefs with relevant delegation of financial authority).

Payments under PFAs are determined by a schedule and are contingent upon receipt of satisfactory deliverables including technical and financial reports.   

Payments must only be released to the UNAIDS partner upon acceptance of the required reports, including the prescribed UNAIDS financial report duly filled and signed by the authorised official, and following certification by the UNAIDS technical officer responsible for the contract that the work is proceeding or has been completed satisfactorily. For interim payments, a minimum of 70% of the total amount previously transferred should be confirmed as spent (not only committed) before the next tranche is transferred. The final payment is only made on receipt of a financial statement formally certified by the head of the institution or the appointed responsible financial officer duly signed and stamped.

Model formats for technical and financial reports should be used for each PFA and are attached as follows:

Amendment to Programme Funding Agreements

If the implementation of a PFA is significantly behind schedule, UNAIDS may (after receiving a request from the partner) agree to an amendment to the agreement that provides an additional period for the satisfactory completion of the project. A sample letter to amend a PFA in respect of the duration of the Project is attached in the “Relevant templates” section at the end of the chapter.

Likewise, if it appears that some of the objectives or activities laid out in the Agreement are no longer relevant or require modification due to unforeseen circumstances—or if additional funding is necessary to carry out the activities—UNAIDS may agree to a substantive amendment to the PFA. Such amendments will be subject to the approval of the appropriate awarding authority, who will decide whether or not it is necessary to consult the UNAIDS Legal Counsellor. A sample letter to amend a PFA with respect to its objectives/activities/funding is included in the “Relevant templates” section at the end of the chapter.

Termination of Programme Funding Agreements

A PFA must also include provisions for its termination, including the utilization of unused funds. Termination may be due to changes in the situation that led to its approval (e.g. the cancellation of a meeting or project) or the inability of the UNAIDS partner to implement the agreement. 

Regular closure of contract upon receipt of deliverables and completion of activities

The responsible officer needs to ensure proper closure of the PFA subject to receipt of satisfactory documents and final financial and technical reports. The responsible officer has to complete a performance evaluation (PT.17.9 Sample Final Report PFA) to provide an assessment of the achievements. These have to be properly evaluated and uploaded in the official records repository. 

Audit

PFAs are subject to the standard UNAIDS internal and external audit.

In addition, periodic on site reviews (spot checks) of the partners financial records related to the PFA may be carried out. These may be performed by qualified UNAIDS staff at regional or country level or by appointed third party service providers.