Helping NGOs do more with their money

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This year’s Aidex conference in Brussels followed in the slipstream of the World Humanitarian Summit, generating further discussion on the burning topic of ‘localisation’. The two-day event attracted participants from 120 countries with a mix of INGO, donor, UN and private sector representatives.

Unsurprisingly, financing was a key strand. The Grand Bargain, and the target to channel 25% of humanitarian funding to local NGOs by 2020, emerged as a major talking point. In her opening speech, Dr. Jemilah Mahmood (IFRC and chief of the WHS secretariat) singled out the agreement as the most tangible way to advance the localisation agenda.

Mango has long advocated for greater localisation of aid funding. This year we gained significant traction with our #Standards4NGOs campaign – we believe the introduction of NGO accounting standards (which we have begun developing in partnership with the African Academy of Sciences) will build trust between local NGOs and donors. This will be critical to realising local funding targets, and supporting longer term investment in local institutional capacities. 

Making aid as local as possible, and as international as necessary

Few attendees disputed that the Grand Bargain has potential to galvanise meaningful change - but only if NGOs, donors, governments and the private sector can collaborate on a ‘paradigm shift’ that plugs more local responders into money flows and allows INGOs to transition to the role of enablers, not doers. Here are the two messages that resonated the most:

1. Back donors need to make pooled funding systems more accessible to local NGOs

The current system is too bureaucratic and excludes many local organisations from accessing pooled funding. Mango spoke with Jemilah Mahmood, who elaborated on the challenges posed by short-term funding approaches and explained how IFRC are developing a long-term strategy to widen access to pooled funding for local partners:

“…we have set up pooled mechanisms and we make it very quick and easy to send it out, and then have clear follow-up mechanisms. Having a preparedness approach to emergency funding – it seems a bit paradoxical – but it’s not there. Most of the time there are a lot of emergency funds, but people are not prepared to actually deal with the emergency funding.

The other issue of course is that… if we are going to start increasing a lot of funding to local actors, are the systems already in place? For example, national legislation for receiving international financing, accounting standards that are required and so forth. We need to have a much longer term view to address this issue of localisation. And the financial institutions, or rather the donors, have not set themselves up (not all of them, at least – some of them have), in terms of a multi-year financing approach because for you to actually build and invest in local institutional capacities – you can’t do it on a year-to-year basis.”

Other donors and intermediaries have also made progress in this area; OCHA’s Vincent Hubin described their role as a conduit in sending 20% of pooled funds ($92m) to local NGOs via country-based pooled funds.

However, for some of the larger institutional donors, progress is much slower.  Nadim Karkutli, Manager of the EU Syria Crisis Trust Fund, explained that although they are exploring alternative models that place emphasis on building local capacity (for example partnering with Syrian CSOs), this does not include building financial management capacity (outsourced accounting is built into proposals). Increasing local access and rapidly channelling emergency funds are not viewed as easily reconcilable issues:

“Ideally you’d be able to work without any intermediaries… you work with the local municipality, …the local NGO, and they have the capacity to respond to all of the accountability and financial management requirements (we spend about 30-40% sometimes of our staff time on accountability, on reporting, to the court of auditors, to the internal audit service, to the evaluations, to the annual audit of our fund, and so forth) but that is often not the case, obviously.

So when you have such a situation you will have to strategically channel your funding into programmes. We ask you to partner up with other INGOs… and we want to leverage your local networks…with local partners that you already had assessed, you already worked with, that you can vouch for. So yes, the big elephant as the EU, as a big donor, we have people on the ground but it’s very much the same as ECHO whether it’s humanitarian or trust fund development, we need to very quickly put a lot of money into such a response.”

With regard to finding cost-effective, rapid ways to build capacity in future, Karkutli proposed virtual learning as an area where private enterprise could add significant value.

2. Cash transfer programming needs to be increased, but donor constraints must also be addressed

Most agreed that cash needs to play a bigger role (just 6% of all aid is delivered in the form of cash and vouchers). Claus Sorensen of the European Political Strategy Centre countered the myth that cash brings a higher risk of fraud, explaining that non-cash items are just as susceptible. He also stressed the need to stop restricting how people consume goods, highlighting the efficiency of cash over in-kind aid and the social and economic benefits of cash-for-work programmes.

However, audience discussion reflected that the reality of donor constraints does not support innovation in this area. As one NGO worker pointed out, cost is king when working with donors, who will favour internationally shipped goods from established suppliers, and build this into framework agreements.

Some audience members challenged the emphasis on cash, warning that it is not a silver bullet or substitute for good programme design. However, as Paula Gil Baizan (CaLP) pointed out, the onus should be on “selecting the right tools for the job”, deploying cash where appropriate.

Establishing trust and complementarity between local and international actors is central to addressing new challenges

The over-riding message from Aidex was that it is possible to strike a balance between local and international intervention, but this requires significant investment in long-term, cross-sector coordination. Jemilah Mahmood gave an excellent summary of the four ingredients (“four T’s”) required to make the Grand Bargain an effective vehicle for change:

  1. Tailored approach – mapping out local and international capabilities and seeking ways for each to add value according to context, whilst being aware of international limitations
  2. Trust – international agencies and donors need to develop confidence in local actors and take more risks
  3. Time – building trust and partnerships takes time, and requires international actors to take a long-term view
  4. Technology – longer-term investment, and more of it, is required to have a real impact on local communities, from delivering aid by drone to collecting data on local effectiveness.

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