Helping NGOs do more with their money

What's money got to do with resilience?

Natural disasters destroy lives and infrastructure but it is the wave of money that follows which too often destroys the resilience of local NGOs. What lessons can we learn from past crises which might apply in the Philippines?

Too little, too late - at first
The first challenge that local organizations face is getting access to sufficient money, quickly enough to respond. Too often international relief is stalled outside the areas of most need – while local organizations are responding in the worst-affected areas as best they can but with extremely limited resources.

Too much, too fast with too little capacity-building - to follow
However, after the initial response phase, local organizations can struggle to deal with a massive influx of funds and the need to rapidly scale up operations. This funding is often accompanied by demands for complex and varying requirements on reporting and compliance from multiple donors. Staff turnover can be a real challenge too, as there is often a skill shortage, especially of local staff with project planning, management, and finance skills. Rapid turnover of staff makes it harder to sustain the culture and values of local organizations, and can weaken internal controls. This disabling environment creates real challenges to effectiveness, and also leads to the increased risk of fraud and corruption.

Where has all the money gone?
Then as the humanitarian funding runs out, local organizations have to rapidly scale back their operations, sometimes leaving them unable to retain staff at the levels of responsibility and salaries at which they have been hired. Meanwhile, few local organizations will have had a chance to consider how to develop financing strategies to provide them with the sort of diverse and ongoing income streams necessary to sustain themselves to do ongoing disaster preparedness work. The result can be that organizations are left weaker and less resilient than they were prior to the disaster.

Why aren’t we learning from past mistakes?
Most post-response evaluations from Haiti suggest there was insufficient emphasis on capacity-building of local organizations. While that recognition is important, I worry that insufficient emphasis is given to building financial management capacity and resilience. Too many donors view financial management as “overhead,” and invest in financial capacity-building only to ensure compliance or prevent fraud and mismanagement rather than as an essential element of good programme design. It is encouraging that the UK DFID’s Humanitarian department has just revisited its long-held historic cap of 7% on “overhead,” but I do not think this yet signals a more enlightened view of the role of good financial management in building the capacity and resilience of local organizations. Below, I suggest a few top tips that we can use in humanitarian response, at present most relevantly in the Philippines.

Top Tips on building the financial capacity and resilience of local NGOs in humanitarian response

1. Rapid Response Funding
Put in place a mechanism to enable long-term local partners to rapidly draw down funds when disaster strikes.

2. Help partners self-assess and build their financial management capacity
Support local partners to self-assess their capacity and develop their own capacity-building plan (many NGOs use Mango’s Health Check). Then collaborate with other partners and donors to provide and coordinate training and support to strengthen systems and controls to deal with scaling up operations.

3. Take a risk-based approach to financial monitoring and capacity-building
Assessing financial management capacity also acts as a risk and opportunity analysis. This analysis should be used to prioritize both capacity-building support and financial monitoring. Work most intensively with those organizations that have the most risk and opportunity to develop their financial management capacity and resilience. Ensure that financial monitoring and support reinforces self-assessment and self-development, as otherwise this support will be viewed as “policing” or “box-ticking.”

4. Plan for financial sustainability
Work with local partners to develop long-term financial plans and ongoing income streams well in advance of funding running out. Also plan the scale-down in ways which enable retention of key staff, whenever possible.

 

Mango is actively seeking partners to work on strengthening the financial management capacity of local NGOs in the Philippines. We are also very interested to share and build a stronger evidence base of the role of financial management in resilience. 

Tim Boyes-Watson

 

This article originally appeared at http://phap.org/thematic-notes/2014/march/what%E2%80%99s-money-got-do-resilience?

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