For the purpose of the Global Fund grants, examples of inventory are health products such as pharmaceuticals, medical consumables, and medical equipment. UNDP Country Offices (COs) are required to count and report Global Fund inventory items only in cases where complete control over the Global Fund inventory is exercised until final distribution to the beneficiaries. In these cases, UNDP manages the complete logistics of inventory management either directly or through contracted third parties. The UNDP Global Fund Partnership and Health Systems Team (GFPHST) reviews country arrangements and will confirm where inventory recognition is required.

There are different practices in exercising control over Global Fund inventories until they are finally distributed to the beneficiaries. The Country Offices might be required to count and report Global Fund inventory items, i.e., where UNDP is deemed to have full control over inventory in accordance with UNDP’s inventory policy and year end guidelines on financial year closure.

Important:  if arrangements have changed in other countries (resulting in UNDP’s control over inventory), it will be the responsibility of the CO to inform the GFPHST, count the inventory and submit the required reports. If there are any questions, COs should contact their respective OFM/Finance Business Advisor (FBA) Manager with the GFPHST in copy.

It is expected that all undistributed health products in the following scenarios should be reported as inventory at the end of a quarter if one or more of the control criteria are met:

• Inventory items held at UNDP Central or Regional Warehouses/ storage locations.
• Inventory items are held at Government Central or Regional warehouses/ storage locations.
• Inventory items are held at an SR’s warehouses who are contracted by UNDP for providing logistics.
• UNDP can control or dictate further distribution of the items held at the above locations.
• Items in stock are insured by either UNDP or Global Fund project funds.
• UNDP bears the risks of loss, theft, damage, spoilage, etc.

The relationships UNDP has with Sub-recipients (SRs) and Agents vary but the following underlying concepts should be used as a guide:

• Sub-recipients: According to standardized SR Agreements, the SR is in charge of the distribution and safeguarding of the inventory (inventory in SR/government warehouses and under their control) whilst UNDP acts in a monitoring and evaluation role. In these instances, the inventories will be expensed when procured and not treated as a current asset at the end of a quarter if not distributed. However, there are instances where according to the nonstandard agreements, UNDP is always in control of Inventories until it reaches the end users where control is transferred. Consequently, these will be regarded as UNDP inventory at a period end and recorded and reported as inventories under generic project 00039902.
• Agents: Where UNDP employs a third party to act on its behalf as an Agent to store and distribute health products to the end users, if UNDP still controls and administers the distribution i.e. decides who, where and when; and is responsible for any loss, damage or spoilage in transit before it reaches the final end users, then it should be regarded as UNDP inventory. At the point the inventory is officially handed over to the end users, it is no longer UNDP inventory. Again, this is dependent on the agreement UNDP has with the Agent. UNDP must examine the substance of the transaction, rather than the form of the agreement with other parties and ensure that control is demonstrated before recognizing and reporting inventories as assets.

Global Fund-specific count procedures:

The standard file-naming convention for the inventory count reports differentiates submission type between Global Fund and Non-Global Fund projects.

For Global Fund projects, medical items are bought centrally by the Copenhagen office. As such, column 22 (Valuation) should be the same as column 18 (cost). If the medical items are not bought centrally, then valuation must be estimated and documented.