Efficiency and Inefficiency in Humanitarian Financing€¦ · How humanitarian actors define...
Transcript of Efficiency and Inefficiency in Humanitarian Financing€¦ · How humanitarian actors define...
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EfficiencyandInefficiencyinHumanitarianFinancingDecember2017AbbyStoddard,LydiaPoole,GlynTaylorandBarnabyWillitts-KingwithShoaibJillaniandAlanPotter
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ThisstudyismadepossiblebythegeneroussupportoftheAmericanpeoplethroughtheUnitedStatesAgencyforInternationalDevelopment(USAID).ThecontentsaretheresponsibilityofHumanitarianOutcomesanddonotnecessarilyreflecttheviewsofUSAIDortheUnitedStatesGovernment.
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TableofContents
Acknowledgments..................................................................................................................iv
Acronyms................................................................................................................................v
ExecutiveSummary................................................................................................................1
1.Introduction.......................................................................................................................51.1Backgroundandobjectives................................................................................................................51.2Researchapproachandmethods......................................................................................................61.3Caveatsandlimitations......................................................................................................................8
2.Definingefficiency..............................................................................................................92.1Typesofefficiency.............................................................................................................................9Figure1:Efficiencyinfunding:Conceptualframework.........................................................................112.2Causesofinefficiencyinhumanitarianfunding...............................................................................11
3.Efficiencyfindingsforfundingmodalities..........................................................................133.1Directgrants.............................................................................................................................13Figure2:Globalproportionsofemergencycontributions,2015–2016.................................................13Table1:AveragesfromsampledcontributionsinEthiopia,Iraq,andMyanmar(2015and2016).......143.2Bilateralgrantintermediaries..........................................................................................................183.3Global-levelpooledfunding(CERFandStart)..................................................................................223.4Country-basedpooledfunds............................................................................................................243.5Consortiaandframeworkagreements............................................................................................273.6Corefundingandinternalinstruments............................................................................................28
4.Otherissues:Multiyeartimeframesandearmarking.........................................................304.1Multiyearfunding............................................................................................................................304.2Earmarking.......................................................................................................................................30
5. Conclusionsandsuggestedguidanceforconsideringefficiencyinfundingdecisions......315.1Areasforaction................................................................................................................................315.2Guidingprinciplesfordonordecision-makingregardingefficiency................................................345.3Enhancingefficiencythroughamorecoordinated,evidence-basedapproach...............................36
References............................................................................................................................37
Annex1:Listofpeopleinterviewed.......................................................................................39
Annex2:Quantitativeanalysisdetails...................................................................................42
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Acknowledgments
ThisstudywouldnothavebeenpossiblewithouttheconsiderablesupportandcooperationofthefollowingAdvisoryGroupmembers,whohelpedguidedthemethodologydevelopment,sharedtheirinsightsininterviews,andcooperatedinprovidingquantitativedatafromtheirfieldofficestoassistintheanalysis.HelenAlderson,ICRCSandraAviles,IASCHFTT/FAOAndreadeDomenico,OCHAFCSLisaDoughtenandMichaelJensen,IASCHFTTandCERFSecretariatChrisKaye,WFPChristopherLockyear,ACFJemilahMahmood,IFRCPatriciaMcIlreavy,InterActionJamesMunn,NRCMarkPryce,OCHASanjanaQuazi,UNICEFDeeptiSastry,StartJenniferSime,IRCJulianSrodecki,WorldVisionDonaTarpeyandHirokoAraki,UNHCRTheauthorswouldalsoliketopayspecialthankstotheInternationalRescueCommitteeforhostingthefieldresearchvisittoErbil,Iraq.AdvisoryGroupmemberswerenotunifiedintheiropinionsontheissuesdiscussedinthispaper,reflectingthediversityofviewsfoundthroughoutthesector.Theanalysisandconclusionsexpressedinthereport,aswellasanyerrorsoffact,belongtotheauthorsalone.
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Acronyms
CBPFs Country-BasedPooledFundsCERF CentralEmergencyResponseFundDAC DevelopmentAssistanceCommitteeDEC DisasterEmergencyCommittee(UK)DFID DepartmentforInternationalDevelopment(UK)DRC DemocraticRepublicoftheCongoDREF DisasterReliefEmergencyFundEC EuropeanCommissionECHO EuropeanCommissionHumanitarianAidOfficeERC EmergencyResponseCoordinatorEU EuropeanUnionFAO FoodandAgricultureOrganizationFTS FinancialTrackingServiceGHD GoodHumanitarianDonorshipHC HumanitarianCoordinatorIASC Inter-AgencyStandingCommitteeonHumanitarianAffairsICRC InternationalCommitteeoftheRedCrossIFRC InternationalFederationofRedCross/RedCrescentSocietiesIRA ImmediateResponseAccount(WFP)NGO Non-governmentalOrganizationOCHA UNOfficefortheCoordinationofHumanitarianAffairs
OECDDAC OrganisationforEconomicCooperationandDevelopment’sDevelopmentAssistanceCommittee
OFDA OfficeofU.S.ForeignDisasterAssistanceUNHCR UnitedNationsHighCommissionerforRefugeesUNICEF UnitedNationsChildren’sFundUSAID UnitedStatesAgencyforInternationalDevelopmentWFP WorldFoodProgram
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ExecutiveSummary
Thegoalofthisstudywastodefineandmeasureefficiencyinthecontextofinternationalfundingforhumanitarianresponse.CommissionedbytheOfficeofU.S.ForeignDisasterAssistance(OFDA),theresearchwasconductedtohelpinformdonordecision-makingatatimeofsurgingfinancialdemandforhumanitarianaidandnewmomentumforchangeinthehumanitariansectorfollowingtheWorldHumanitarianSummitinMay2016.
Efficiencyisjustonenarrowcriterionbywhichtoassessthehumanitarianfundingarchitectureandcannotbeconsideredinisolationfromfundingeffectivenessandbroadergoalsofthehumanitarianresponse.1However,inaresource-scarceandlargelyreactiveenvironment,howefficientlymoneymovestoenableresponseisacriticallyimportantcomponent,andonewhichhasreceivedlittlein-depthattentionatthesystemlevel.
Howhumanitarianactorsdefinefundingefficiencydependsonwheretheysitinthesector.Forthelargeinternationalagencies,efficientfundingisthatwhichisthemostflexible(i.e.,least“earmarked”bythedonorforspecificpurposes)andtimely(eitherrapidlydisbursedorreliablypredictable)whilerequiringthefewestadministrativeinputs.Smallerandlocalorganizationsfinditmostefficienttoreceivefundingdirectlyfromthedonorratherthanthroughanintermediaryagency,whichcanbeslowtodisburseandrestrictivewithoverheadallowances.Andfordonors,efficiencyoftenmeanshavingfewer,largerchannelsthroughwhichtochanneltheirhumanitarianfunding,preventingtheadministrativebottleneckscausedbytheneedtoindividuallymanagenumerousgrants.Itiseasytoseehowthesedifferentvantagepointscanbeatoddswitheachother,andnoneofthemalonespeaktowhatconstitutesfundingefficiencyforthewholesector.
Thestudydefinesoverallefficiencyofthehumanitarianfinancingsystemasacombinedmeasureofbothtechnicalefficiency(thespeedandsmoothnessofthepipelinesfromdonortoaffectedpeople)andallocativeefficiency(theappropriateallocationofresourcestospecificproblemsorobjectives).Bothmeasuresarerequiredforaholisticassessmentofthevariousfundingmechanismsthatconsiderstheirdifferentpurposesandvalueadded.
Theresearchteammadefieldvisitstothreehumanitarianresponsesettings—Ethiopia,Myanmar,andIraq—togatherdetailedinformationonthepracticalexecutionofdifferenttypesofcontributions.Theanalysisinvolvedexaminingthetransactionchainsinasampleofcontributionsforeachofthemainhumanitarianfundingmodalities:directgrants(bothpublicandprivate)andpooledfundingmechanismsattheglobalandcountrylevels.Usingthedataprovidedbyagencies,thestudycomparedthedifferentfundingmodalitiesintermsoftheirtimeliness,sufficiency,transactioncosts,andotherindicatorsoftechnicalandallocativeefficiency.Inadditiontoa
1Effectivenessoffundingwouldbeameasureofwhetherandhowwellthefundingachieveditsintendedresults.
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quantitativeanalysisofthisdata,thereportincorporatedqualitativeevidencefrom86keyinformantinterviewsaswellasagloballiteratureandfundingreview.
Theresearchyieldedfourkeyfindings:
1. The primary modes of funding have not yet proved efficient for rapid response. 2. Disproportionate requirements and inflexibility hinder efficiency at all levels. 3. The added value of intermediary agencies in multi-link (pass-through) grants is inconsistent, and
they often create net inefficiencies. 4. Allocative efficiency and the stated goals of localization are impeded by risk perception and
capacity constraints on the part of donor governments.
Eachisdiscussedbelow.
Theprimarymodesoffundingarestillinefficientforrapidresponsepurposes.
Insuddenonsetcrises,fundingmustbeavailabletospendwithindays—notweeksormonths—ifitistosupporttimelyresponseefforts.Becauseonlyafewhumanitarianactorshavestandbyfundsthatcanbetappedinadvanceofdonorfunding,thismeansthatagrantmustberequested,approved,anddisbursedwithinaveryshorttimeframeforittofunctionasarapidresponseresource.Thestudyfoundthatnecessaryspeedindisbursementsforrapidresponsewaslackinginallthreecaseexamplesandacrossthemajormodalities,includingthosedesignedspecificallyforthepurpose.Anarrayoftransactioncosts,includingoverlyheavybureaucraticstructures,currentlyworksagainsttechnicalefficiencyoffundingflows.
Inthecaseofbilateralgrants,becausetheproposal-to-awardperiodtypicallyrepresentsthelongesttimelag,donorsshouldprovidegreater“pre-positioned”fundingwithindividualagenciesand/ormultiagencyconsortiacapableofputtingthemoneytoworkimmediatelyintheeventofasuddencrisis.StrongUN-NGOpartnershipsinsomechroniccrisissettings,andtheexperienceoftheStartFund,illustratehowthispreparednessapproachcanreducefundingdelaysandsupportrapidresponse.Pooledfundgrantsweredecidedmorequicklythangrantsfrombilateraldonors,butneverthelessfaceddelaysonboththefrontandbackendsoftheapprovalprocess.Thiscouldbeimprovedbywaivingtherequirementforjoined-upproposalsincaseswherethisprocesswouldhindercriticalrapidaction,andoverlyheavycluster-levelprocessesingeneral.
Thebiggestgainintimeliness,however,canonlycomethroughinternalagencyreformstoremediatethelongdelaysfromtheinitialawardtotheonwardcontractingofanddisbursementtopartners.
Disproportionaterequirementsandinflexibilityhinderefficiencyatalllevels.
Thesmallestandshortest-durationgrantshavetheheaviesttransactioncosts,andthesmallestNGOstypicallybearthegreatestadministrativeburdenfortheleastreward.Theallocativeefficienciesgainedbystrategiccoordinationandground-leveldecision-making(thelogicbehindthepooledfunds)canbeoutstrippedbythesetechnicalinefficiencies.Inordinatelyhightransactioncostsonsmall-sizedgrantsareinefficientfordonorandgranteesalike.Theseshouldbeaddressed
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bymakingtherequirementscommensuratewiththesizeandtimelinesofthegrantsandbymaximizingtheflexibilitytomodifythemtosuitchangingconditions,withintheboundsofappropriateaccountabilitycontrolsandpragmaticriskmanagement.
Theaddedvalueofintermediaryagenciesinmulti-linkgrantsisinconsistentandtheyoftencreatenetinefficiencies.
Thehumanitarianfundingsystemneedsamindsetshiftandachangeinstandardoperatingproceduresthatrequireabusinesscaseforusinganintermediaryagency,demonstratinghowitwouldaddvalueasopposedtoautomaticallyassumingitwill.Inadditiontoscalabilityandeffectivenessjustifications,partofthecasefortheintermediarywouldincludedemonstratedhigherefficiencyinfunding,contracting,andflexiblemanagementofgrantscomparedtodirectfunding.
Allocativeefficiencyandthestatedgoalsoflocalizationareimpededbyriskperceptionandcapacityconstraintsonthepartofdonorgovernments.
Donorgovernments,foravarietyofdomesticpoliticalandregulatoryreasons,havenotbeenwillingtofundlocalactorsdirectly,deemingittoogreatarisk.TheGrandBargaincommitmentsinthisareahavesofarfocusedmainlyonincreasingindirectfundingtolocalactorsthroughintermediaryagencies(whichmayhelpbuildgreaterlocalcapacitybutdoesnotfosterameaningfulshiftinresponsibility)anddirectfundingtotheactorsthroughthecountry-basedpooledfunds(whichrepresentonlyatinysliverofhumanitarianfundingatpresent).Totheextentpossible,donors(includingpooledfundsdonors)shouldconsidersubsidiarity2indeterminingatwhatleveltomakegrants.Unlesstheallocativeefficienciesandvalueaddedofhavinganintermediarycanbedemonstrated,directfundingshouldbepreferred.Targetedcapacityinvestmentsinlocalorganizations(i.e.,corefundinggrants)canbolsterandenhancetherangeofoptionsavailableinfuturefordonorsseekingtomaximizeefficiencyaswellaseffectiveness.Country-basedpooledfunds,wheretheyarefunctioningwellandallocatingdirectlytolocalNGOs,maybeameansforsomedonorstoachievesubsidiarityandlocalizationobjectiveswhileavoidingthetradeoffinefficienciesofmanagingnumeroussmallgrantstolocalentities.
***Thereportconcludeswithbroadguidingprinciplesforconsideringefficiencyinmakingfundingdecisions:
Maintainthewidestpossiblerangeofoptionsandtoolstoemployfordifferentneeds,usingacombinationofmodalitiestoachieveareasonablebalanceofpredictability,responsivenessandallocativeefficiencybothatthecountryandgloballevels,whileretainingcontingencyfundingatthegloballevelincaseofunforeseenneeds.
2Theorganizingprinciplethatresponsibilityshouldbelocatedwiththemostproximate(leastcentralized)competententity.
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Startingfromthespecificsofthecontextandhumanitarianneeds,matchgoalswiththefundinginstrumentsbestsuitedtoefficientlyservicethem:
• Forrapidresponse,workingthroughpre-arrangedframeworkagreementsorothermechanismswithprovenspeedydisbursementtimeswillbemoreefficientthantraditionalbilateralgrants.
• Large-scale,complex,andprotractedemergenciescausingsimilarneedsamongwidesegmentsofthepopulationmaybebestservedbylargeumbrellagrantingtocompetentcoordinatingbodies(UNagencies,NGOs,orconsortia)thataddtechnicalvalueandprovideeconomiesofscale.
• Specificgapsandunderfundedneedscanbeaddressedwitheitherflexiblebilateralgranting,earliercontributionstopooledfundwindowsforthatpurpose,orboth.
• Smallpocketsofneed,andhighlylocation-specificneedsinindividualareas,willoftenbemoreefficientlyfundedbyeliminatingtheintermediaryandgivingtolocallybasedorganizationsdirectly.
Determineandconsiderotherdonors’plansasfactorsinefficiencydecisions.
Totheextentthatanydonorhasflexibilityofchoiceinfundingmechanisms,thatchoiceshouldbeusedtohelpbalancetheneedsofbothtechnicalandallocativeefficiency,consideringwhatcounterpartsaredoingwithinthelargerpictureofstrategicpriorities.
Agreeonacommonsetofmetricsforassessingefficiency
TheGoodHumanitarianDonorshipinitiativecouldbenefitfromusingaquantifiedefficiencyframeworktoassessfundingmechanismsandagenciesseekingintermediaryroles.Suchaframeworkwouldencouragetransparencyandefficiencyinfundingdecisions,andsupporttheGrandBargaincommitments.
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1.Introduction
1.1Backgroundandobjectives
The“GrandBargain”reformsannouncedattheWorldHumanitarianSummitinMay2016committhemajorhumanitariandonorgovernmentsandagenciestoworktowardaseriesofgoals,manyofwhichareintendedtoimproveefficiencyinthefundingrelationship.Theyincludecommitmentstoreduceduplicationandmanagementcosts,reducedonorearmarking(i.e.,increaseflexibilityinfunding),lightenandsimplifyreportingrequirements,improvefinancialtransparency,increasedirectfundingtonationalfirstresponders,increasecash-basedprogramming,andincreasetheuseofmulti-yearfunding.
Althoughtheoperationalizationofthesecommitmentsisnotyetfleshedout,itisanopportunemomentfordonorstosurveythecurrentmechanismsandchannelstheyuseforhumanitarianfundingtoseehowtheyserve—orhinder—thepursuitofthesegoals.Forthisreason,theOfficeofU.S.ForeignDisasterAssistance(OFDA)commissionedHumanitarianOutcomestoundertakeacomparativeanalysisoftheefficiencyofhumanitarianfinancingtoolsandinstruments.
Official(i.e.,government)humanitarianassistancefundingflowsthroughthefollowingchannels,indescendingorderofpercentage:
• directgrantsforspecificprojectsorprograms• globalpooledfundingmechanisms(theCERF,Start)• country-basedpooledfunds(CBPFs)• un-earmarkedcorefundingcontributionsorframeworkagreements• government-to-governmentaid• global-levelrapiddraw-downfunds(ex-anteagreementsforrapidresponse)(e.g.,IFRC’s
DREF)
Arecentdescriptivebackgroundpaperontheseinstruments,alsocommissionedaspartofthisstudy,foundthatnotonlyhastherecentsurgeinhumanitarianfundingbeenoverwhelminglyfinancedbyasmallgroupoflargedonorgovernmentsandtheEU(justfivedonorsrepresent65percentofofficialhumanitarianflows),butalsothatithasgonethroughthedirect,earmarkedgrantmodality.Theever-increasingpercentagechanneledthroughdirectgrantstoindividualagencieshasdwarfedothermodalitiessuchaspooledfundsandcorefunding(Stoddard,2017).Further,thereportshowedthatdonors’decisionsonhumanitarianfinancingcontinuetobedeterminedmorebypastexperienceandinternalconstraintsthanbyevidenceandcoordinatedstrategy.
Veryfewdonorsoragencieshaveundertakenanin-depthcomparativeanalysisofefficienciesindifferentmodesoffunding,andthecriterionofefficiencytendstogetshortshriftinhumanitarianevaluationsgenerally(Palenberg,2011;Stoddardetal.,2015).ExceptingUKDFID’sextensivedoctrinalworkon“valueformoney,”mostdonorsfactoralooseworkingdefinitionofefficiencyintodecision-making,forinstancelookingbroadlyatprogramsupportcostsversusoutputs.Other
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humanitarianactorsadmit,inthewordsofoneNGOrepresentative,that“wearesotime-constrainedwedon’tconsiderwhatwouldbemaximallyefficient.”
Whenitcomestomeetingurgenthumanitarianneedsincomplexandhighlyvariedcontexts,efficiencyinanarrowcost-per-outputsensewillneverbetheprimaryconsideration.However,ifefficiencyisneverdeliberatelyexaminedasonecriterioninanevidence-baseddecision-makingprocess,thendecisionswilldefaulttopath-dependentpatternsthatareun-strategicandpotentiallysuboptimal.Inthewordsofonedonorinterviewedforthisstudy,“Weareallstrugglingwiththisquestionofwhywearechoosingoneinstrumentoveranother.Sometimeswedon’tnecessarilyknowwhywearefundingparticular[entities/partners],orwhattheircomparativeadvantagesare.”
ItishopedthisstudywillcontributetotheGrandBargainfollow-upbysynthesizingcurrentissuesinefficiencyandidentifyingsystem-widetrendsandgaps.
1.2Researchapproachandmethods
Thedefinitionalframeworkofefficiencyusedforouranalysis,detailedinChapter2,considersthedifferenttypesofefficiencyandperspectivesofactorsatdifferentlevelsandcombinesthemforasystem-levelassessment.ThemethodologyinceptionnoteforthestudyincorporatedtheinputofthehumanitarianpractitionerssittingontheAdvisoryGroupandoutlinedanapproachforassessingandcomparingefficiencythatproceededfromthebelowassumptions.
1.2.1Assumptions
Efficiencyisonlyonecriterioninforminganyjudgment,andseldomthemostimportant.Itispossibletodothewrongthingwithultimateefficiency.Therefore,theconceptofefficiencycannotbedivorcedfromeffectivenesswhenexaminingfinancingmechanismswithdifferentgoals.Theresearchwillbeclearonthispoint,ensuringthatfindingsarenuancedwithrespecttobroaderobjectives(seemorebelow,in“caveatsandlimitations”)andmodestaboutmakingprescriptiveconclusions.Humanitarianfinancingislimitedtothepresentmodalitiesfortheforeseeablefuture.Despiteproposalsfornewglobalfinancingplatforms,andlimitedexperimentationwithvehiclessuchashumanitarianimpactbonds,nowhollynewhumanitarianfinancingmechanismsareonthehorizonyet.Therefore,thescopeofthestudywaslimitedtowhatcurrentlyexistsfordonorgovernmentstochoosefromintermsoffundingmodalities,aslistedabove.
Optimalefficiencyforthesystemwilloftenmeansuboptimalefficiencyatthelevelofindividualactors.Whatismostefficientforonehumanitarianactormaynotbeefficientforotheractorsorfortheoverallsystem.Trade-offsareinevitableandneedbemanagedinawaythatoptimizesefficiencyforhumanitarianfundingwritlarge.Forthisreason,andtoaccountforthedifferentobjectivesofthedifferentpiecesofthehumanitarianfinancingarchitecture,themeasureofefficiencyforthisinquiryisdefinedontwolevels—systemandcomponent—asdetailedbelow.
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1.2.2Global-leveldatagatheringandanalysis
Theresearchersanalyzedhumanitarianfinancingdatafor2013–2016downloadedfromtheUNFinancialTrackingService(FTS).FTSwastheprimarydatasourceusedforfundingfigures,augmentedwhereappropriatebydatafromtheCERFandCountry-BasedPooledFunds(CBPF)data,UNagency/NGOannualfinancialreports,andinformationprovideddirectlybydonorsandagencies.Thefindingsfromtheglobal-levelanalysisinformedandcomplementedthefieldresearchandkeyinformantinterviews.AlthoughthevoluntarybasisonwhichhumanitarianactorsreporttoFTSmeansthatitfailstocapturethefullextentofhumanitarianfinancing,itisstillthemostcomprehensiveandtimelysourceofthisdataandthebestoptionfortrackingglobaltrends.DatafromtheInternationalAidTransparencyInitiative(IATI)werereviewed,butdeterminedtobestillfartooincompletetocontributetoanyrigorousanalysis(althoughintheorythisdatabaseshowspromisetohelpimproveefficiencyinthefuturebyprovidingincreasedtransparencyofthetransactionchain).
Aglobal-levelliteraturereviewencompassedreports,evaluations,andanalysesofhumanitarianfinancingaswellasrelevantagencyandinter-agencypolicystatements.Thisservedasbackgroundinformationandtoindicatethecurrentpointsofcontentionorconsensusonfinancingissues.
Theresearchteamalsoconductedsemi-structuredinterviewswithselectedindividualsrepresentingmajorandemergingdonorgovernments,implementingagencies,andhumanitariancoordinationandfundingbodies.Interviewfindingswereusedtoconfirmandquerythedatafindings,aswellastogleanperspectivesonthekeyfinancialissuesandtrendsinthesector.Inall,86individualswereinterviewedforthestudy(listattachedasAnnex1).
1.2.2Fieldresearch
AfterexploringoptionswiththeinputofAdvisoryGroupmembers,theteamidentifiedthreecasescenariosforfieldresearch:Ethiopia(2016),Iraq(2016),andMyanmar(2015floods).Theselectionofthesethreecasesaimedforregionaldiversityaswellasacombinationofslow-andsudden-onsetemergencies,naturalaswellasconflict-related,andwidelyvaryinguniquecontextualchallenges.
FieldtripstookplaceinFebruaryandMarch,2017.Theresearchcombineddetailedqualitativeinterviewswithhumanitarianorganizationsanddonorrepresentativestocapturearangeofviews,experiences,andcontextualconsiderationsintheassessmentoffundingefficiency.Inaddition,thefieldresearchgathereddataonasampleofhumanitariancontributionsforquantitativeanalysis,describedbelow.
1.2.3Quantitativeanalysis
Theresearchersineachfieldlocationrequestedinterviewsubjectstofillininformationonaspreadsheetcontainingasampleofcontributionsreceivedbytheiragenciesthroughdifferentfundingchannels,asreportedtoFTS.Theworksheetsincludedthefollowingdataquestionsforcompletion:
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• the number of iterations that took place before the proposal was accepted, • the number of days from proposal submission to award, • the number of days from award to disbursement of funds, • staff hours expended on administrative requirements, and • the perceived administrative burden in terms of staff time and inputs required (ranked on a scale
from 1 (light) to 5 (heavy).
Outof32formalrequests,theresearchteamreceived16completedspreadsheetsintotalfrom5UNand11NGOofficescomprising209observations(totalcontributions).Ofthose,149contributionswerebilateralgrantsfromdonorgovernments,49werecountry-basedpooledfundsallocations,9wereCERFallocations,and2wereStartFundallocations.Thespecificdependentvariablesforeachmechanism(dayselapsed,etc.)wereaveragedwithinandacrosscountries,andthedifferencesbetweenthemwerefoundtobestatisticallysignificantbyanindependentsamplest-test.3Thequantitativefindingsagainstthevariousfundingchannelsarepresentedintherelevantsectionsofthepaper.
Becausetimelinessandtransactioncostsarejusttwoindicatorsofonetypeofefficiency,thepaperiscarefulnottooveremphasizethesequantitativefindings,astheywillalwaysneedtobebalancedbyotherfactorsinanydecision.Nevertheless,havingconcretemeasurestoconsideralongsidethequalitativeinformationisuseful.
1.3Caveatsandlimitations
Thestudyaimedtobeasempiricalandquantitativeaspossible,providingconcretemeasuresforwhathasbeenpurelyanecdotalorassumedtodate.However,becauseofthetimeandlabor-intensivenatureofgatheringdatapointsfromfieldoffices,wenecessarilyendedupwithasmallsample.Whilethefindingsofthequantitativeanalysisofthefielddatacorrespondtoglobalfigures(e.g.,theproportionsoffundingthrougheachmechanismareroughlyequivalenttooverallglobalproportions),weneverthelessmustbemodestinclaimingthattheyarerepresentativeofefficiencyperformanceinallemergencieseverywhere.
Eachhumanitarianresponsecontextisuniqueinmanyaspects,andtheabilitytocoveronlythree(Ethiopia,Iraq,andMyanmar)necessarilyinfluencedthefindings.AsobservedbyanAdvisoryGroupmember,“Alotofthethingsthatdon’tworkinIraq,Ethiopia,orMyanmar,arethingsthatactuallyworkquitewellinotherplaces.”Wehopewehavestruckabalancebetweenpointingoutthecase-specificproblemsweobservedandnotover-generalizingfromtheresults.
Finally,theteamiscognizantofvalidopinions,includingamongourAdvisoryGroup,thatleadtoskepticismofastudyonefficiencyinisolationofothervariables.Ourframingoftheefficiencydefinitioninthefollowingchapterspecificallyaddressesthisproblem,and,webelieve,offersasolutionadequatetothegoalsofthestudy.
3Theindependentsamplest-testcomparesthemeansoftwoindependentgroupstodetermineiftheassociatedpopulationmeansaresignificantlydifferent.
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2.Definingefficiency
Practitionersinterviewedforthisstudyofferedwidelydifferingdefinitionsofefficiencyinhumanitarianfunding,from“leastpossiblewaste”to“flexibleandresponsivetoneeds”to“directaspossible,withfewestlinksinthechain.”Notsurprisingly,opinionswerecoloredbytheinterviewees’vantagepointsinthehumanitariansector.Donorintervieweeswereconsistentthatefficiencyfromtheirperspectivemostlymeantminimizingtheirownadministrativeburdenbylimitingthenumberofcontractsundertheirdirectmanagement.Inotherwords,funnelinglargeramountsthroughfewer(knownandtrusted)recipientagencies.First-levelrecipientagencies(UNagenciesandlargeinternationalNGOs)sawefficientfundingasthatwhichwasmaximallyflexiblewithminimaltransactioncosts.(Theidealinstrument,describedbyUNagencyrepresentatives,wasanun-earmarkedglobalcontributionwithlittleproposal,reporting,orcompliancerequirements.)NationalNGOsstressedsufficiencyingrantstoenableexecutionandcontinuityoftheiroperations(inotherwords,reasonableoverheadallowances)andtheneedforlessoneroustransactioncostsandbarrierstoentry.Allagreedthatspeedwasacriticalelementforefficientfunding,buttheneedforspeedcouldbeoffsetbypredictabilityiftherecipientagencywaslargeenoughtohavethecapacitytoadvancethenecessaryfundsforrapidresponseorinslow-onsetemergenciesorchronic-crisisenvironments.
Whenviewedthroughthelensofdifferentactors’interestsatdifferentlevelsinthesystem,efficiencycanappearasazero-sumgame,inwhichefficiencygainsforonepartycreatesinefficienciesforanother.Forexample,donorsmaymaximizetheirefficiencybymakinglargerumbrellagrants,therebyshiftingtheadministrativeburdentoagencies,andinternationalagenciesmayreducecostsbyrestrictingoverheadallowancesfortheirNGOpartners,creatinginefficienciesatthesubcontractorlevel.Forthatreason,toarriveatanobjectiveassessmentoffundingefficiencyatthesystemlevelrequiresadefinitionthatcanbalancecompetinginterestsofdifferentactorsalongthetransactionchainandwhichiscenteredonthebroaderfundingefficiencyofthecollectiveresponse.
2.1Typesofefficiency
Tobeginwithsomebasicdefinitionsofefficiencyineconomicterms,initssimplestdescription,efficiencyismeasuredbyaratioofoutputstoinputs.Thehighertheusefuloutputproducedrelativetoinputorcost(inmoney,fuel,staffing,time,energy,etc.),thehighertheefficiency.Ifeffectivenessis“gettingthingsdone,”i.e.,achievingobjectives,efficiencyis“doingthingswell”byreducingwaste,optimizingresources,andmaximizingdesiredoutputs.
Forourpurposes,itusefultounpacktheconceptfurtherwiththedistinctionsoftechnical(oroperational)efficiencyandallocativeefficiency.
Technicalefficiencyinhumanitarianfundingcanbeviewedasameasureofhowfundinggetsfromdonortoenduser(theaidrecipient)withaminimumofimpediments,transactioncosts,anddelays.Examplesoftechnicalefficiencyinafundingmechanismwouldthereforeincludetimeliness(meaningeitherspeedorpredictabletiming).Tobetechnicallyefficient,moreover,requiresahighratioofsufficiency(thesizeofthecontribution)tothetransactioncostsentailed(e.g.,hours
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requiredforproposalwriting,negotiation,reporting,andotheradministrativeandcompliancetasks).Economiesofscaleisatypeoftechnicalefficiencyachievedwhencostsarereducedasafunctionofenlargingthedistributivechannelsorimplementationmechanisms,therebyconsolidatingandstreamlininginputs.Anintermediaryagencyorumbrellagrantmanagercansometimesprovidethistypeofefficiency,forinstancebycoordinatingcountrywideeffortsofnumerouspartnerstowardacommonoutcomeobjectiveandprovidingasingleprocurementpipelineorlogisticalplatform,thusavoidingduplicativecosts.
Allocativeefficiencyisconcernedwithdirectingfundingtowhereitwillhavethelargestbenefit,andthereforerelatestorelevance/appropriatenessandprioritizingthemosturgentneeds(Palenberg,2011).Examplesofallocativeefficiencywouldbefundingmechanismsthatfillgapsormitigateagainstduplicationofresources.Similarly,fundingmechanismswillhaveallocativeefficiencyiftheyhavetheflexibilitytoredirectormodifyspendingaswarrantedbychanginghumanitarianconditionsandpriorities.Somehumanitarianactorshavealsosuggestedatemporalperspectiveofefficiencyinsettingsofchronicvulnerability,namelytheimpactorreturnoninvestmentofdifferentfundingstrategiesinthelongterm.Subsidiarityreferstotheprincipleoflocatingresponsibilityoractionatthelevelnearesttowhichitisrequired.Thesubsidiarityprinciplecanoftensupportanefficiencyargumentfor“localization,”i.e.,facilitatingtheassumptionoflargerrolesbylocalactorsintheprovisionofaidtotheirownpopulations(inadditiontotheeffectivenessandsustainabilityarguments.)Incaseswherelocalactorsarebestplacedtoresponddirectlytospecificsituationsandneeds,channelingtheirfundingthroughintermediariesisinefficient.However,subsidiarityandlocalizationarenotalwayssynonymous.Situationswilloccurwhereabroaderscopeofactionprovidesgreaterallocativeefficiencyand/orwhereinternationalactorswillrepresentaddedvalue,forinstancebyprovidingtechnicalassistance,capacityinputs,centralizedprocurement,andcoordinationofmultipleeffortsforacommonoutcome.Wehavethereforeincluded“addedvalue”inthesamecategory,asacorollarytosubsidiarity.
Itisimportanttoconsideralltheaboveinoursystem-levelefficiencyassessment,astheyrelatetodifferentaspectsandobjectivesofhumanitarianresponse.Afterall,thehumanitariansectorisnotafactoryorfree-marketenterprise,butratherauniquehybridofpublicgoodsprovisionandcompetitiveinterestsengagedincomplexandvariedactivities.So,forexample,onefundingmodalitymayhavesuperiortechnicalefficiencybutmaynotbescalable,whileanothermayentailheavytransactioncostsbutneverthelessresultinallocativeefficiencies.Theprincipleofhumanityandtheprioritizationofthemostvulnerablealsooftenrequiremoredifficultandexpensiveinterventions,forinstance,reachingremote,hard-to-accesspopulations.Insum,differentfundingmechanismsorarrangementscangenerateefficienciesindifferentways,soshouldnotbeheldtoareductivemeasureofinputs-to-outputs.4
Manyintervieweeshighlightedwhattheyperceivedasbroader“structuralinefficiencies”inthehumanitariansystemrelatingtomandates,architecture,andprocesssuchasclustercoordination.
4AsimilarlogicisfoundinUKDFID’s“valueformoney”formulation,inwhichefficiencyislinkedtoeffectivenessinpursuitofadesiredoutcomeanddependentonthespecificcircumstancesofthecontext.
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Thisstudyhasfocusedontechnicalandallocativeefficiencyasthelevelofanalysistomakeitsscopemanageable,whilereferencingsuchissueswhererelevant.
Figure1:Efficiencyinfunding:Conceptualframework
2.2Causesofinefficiencyinhumanitarianfunding
Themainimpedimentstoefficiencyinhumanitarianfunding,regardlessofthemodality,canbegroupedunderfourareas:transactioncosts,riskperception,informationasymmetry(i.e.,lackoftransparency),andcompetingobjectives.
Transactioncostsinhumanitarianfundingareanyrequiredoutlaysorinputsthatsloworreducethefundingflowbetweentheoriginaldonorandend-userecipient.Organizationaladministrativeprocessesrequiredforthefundingtoflowareconsideredatypeoftransactioncost,sometimesmorepreciselytermed“institutionalcosts”(Cheung,1987).Whilesomeleveloftransactioncostsisinevitable,minimizingthemiscentraltotechnicalefficiency.Forourpurposes,thedefinitionoftransactioncostsiswideenoughtoincludeallthefollowing:
• multiplelinksinthetransactionchain,leadingtoaccumulatedoverheadcosts;• bureaucraticprocedures,processrequirements,andadministrativeburdensrequiringstaff
timeandattimesevenadditionalstaffpositions;and• proceduraldelaysinfinaldisbursementandactivitystart-up.
Technicalinefficiencyofthistypecanbebuiltintofundingstructuresandprocedures,orcausedbytheirpoorimplementation.Inthecontextofrapid-onsetemergencies,speedwillbeaprimarycasualty.Slownessinfundingcanalsocreateallocativeinefficienciesbecauseoftenbythetimethefundsarrive—weeksormonthsaftertheinitialshock—theresponsetheywereintendedtofundwilllikelynolongerbewhatismostneeded.
TechnicalefficiencyTimeliness
(speed/predictability)
Sufficiency/limitedtransactioncosts
Economiesofscale
Allocativeefficiency
Flexibility
Subsidiarity
Addedvalue
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Liketimeliness,insufficiency,islinkedtotransactioncosts,inthatthereisapointofdiminishingreturnsafterwhichthesizeofthegrantistoosmallfortheinvestmentintransactioncoststobeconsideredworththeeffort.
Effortsbydonorstoreducepotentialrisks—includingfraud,waste,ordiversion—havedriventheincreasingcomplianceburdenonagencies.Theseaccountabilitycontrolscangeneratetechnicalinefficiencies.5Totheextentthatriskconsiderationsalsodrivewherefundingisdirected,theycanalsonegativelyaffectallocativeefficiency(nottomentionpotentiallycompromisingthehumanitarianprincipleofimpartiality).Riskconcernsconstrainthewillingnessofdonorstopursuesubsidiarity,thuscreatebarrierstoamorelocalizedresponse.Governmentdonorsgenerallywillnotfundnationalactorsdirectlyforreasonsofperceivedfiduciaryriskand,asoneputit,the“needtobeaccountabletoourtax-payers.”Likedonors,theUNagenciesandinternationalNGOsthatsub-contracttosmallerorlocalorganizationscanalsocreaterisk-driveninefficiencies.Forinstance,becausecommonagreementsorstandardsforvettingpotentialpartnersdonotexist,oftenthesameorganizationmustbevettedbynumerousagenciesandineachnewoperatinglocation,takingconsiderabletimeandeffort.
Informationasymmetry,orwhatmanyinthehumanitariansectorlabel“lackoftransparency,”isalsoadriverofinefficiency.Theclustersystemhasarguablyimprovedtransparencyamonghumanitarianactors,butaccordingtointervieweesforthisstudyseriousissuesremain.One,inMyanmar,notedthattheoveralllackoftransparencyamonghumanitarianactors,andbetweentheimplementersandtheirdonors,madeitverydifficulttogetaholisticviewoftransactionchains.Insuchasituation,onecan’tevenidentifywheretheinefficienciesaretoaddressthem.Onedonorrepresentativelamenteda“totallackoftransparency—wereallycannottellwhatitisthatagencies,particularlytheUN,dowiththemoney.Thereisnodata,soitisveryhardtoknowwhatisefficient.”(Agenciestendtoframetheissuemuchdifferently,andspeakofa“lackoftrust”onthepartofdonorsfortheirpartners.)Othertypesofinefficiency,likedelays,canbemadeworsebylackofinformation.OneINGOrepresentativereportedbeingunabletomobilizeinBorno,Nigeria,despitehavingateamontheground,intheabsenceofreliableinformationfromthedonorthatfundingwouldultimatelycomethrough.
Finally,competingobjectivesandincentivesonthepartofhumanitarianactorscancreateallocativeinefficiencies.Donors’fundingconsiderationsgobeyondjustmeetinghumanitarianneeds,andpoliticalvariableshavethepotentialtoimpactefficiency(Beck,2006).OECDguidelinesfordonorssuggestincreasingthetransparencyoffundingdiscussionsasatooltolimitpoliticalincentivesfromovershadowinghumanitarianpriorities(OECD,2012).Implementingagencieslikewisehaveorganizationalinterestsforgrowthandcompetitiveadvantageovercounterparts,anddecisionsdrivenbytheseinterestsarelikelynottofavormaximumefficiency.
5AnINGOintervieweegavetheexampleofaChadprograminwhich80%ofalltheINGO’ssupportcostswerebeingusedtoaddressadonor’srequirementsforfinancialreporting,monitoring,andcompliancechecks.ThedonorwasneverthelesspressuringtheINGOtosignificantlyreducetheirsupportcostsfromthebudget(withnochangeinreportingrequirements).
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3. Efficiencyfindingsforfundingmodalities
Usingtheaboveframingofefficiencytypes,thissectionpresentstheresearchonthedifferenthumanitarianfundingmodalitieswithinspecifichumanitarianresponsesinEthiopia,Iraq,andMyanmar.Thefindingsforeachmodalityareorganizedunderthethemesoftimeliness,sufficiency/limitedtransactioncosts,economiesofscale,flexibility,subsidiarity,andaddedvalue.
Contextplaysanimportantroleinassessingefficiencyinallthesecases.Therearebigdifferences,forinstance,betweenwhatmakesfundingefficientinsudden-onsetnaturaldisastersorrapidpopulationdisplacementsversusongoingprotractedcrisesorstaticrefugeesituations.Intheformer,rapidityisofcentralimportance,whilethelatterstandstobenefitmorefromlonger-term,predictablecycles,consolidatedsupportstructures,andeconomiesofscale.Ineachofthethreefieldcasesexaminedforthisstudy,sudden-onsetemergenciesorrapidnewdevelopmentsoccurredamidlong-runningcomplexorconflict-drivenemergencies,affordingtheopportunitytolookatbothscenarios.
3.1 Directgrants
Byfarthelargestpercentageofhumanitarianfundsdirectedtoemergenciesacrosstheworldeachyearcomesintheformofdirect(“bilateral”)grantsfromdonorgovernments(includingtheEU)torecipientagencies(Figure2).
Figure2:Globalproportionsofemergencycontributions,2015–2016
Source:OCHAFTS(ftsarchive.unocha.org)Whennaturaldisastersareexaminedinisolationfromcomplex(conflict-relatedorprotracted)emergenciesduringthesameperiod,theproportionschangesomewhat,withgovernmentdirectgrantsstillrepresentingthemajoritybutdroppingto63percentofthetotal,privatecontributionsat22percent,andpooledfundsat10percent.FundingpatternsinEthiopia,Iraq,andMyanmar(allcomplexemergencies)roughlyfollowedtheglobalnorm,withdirectgrantsrepresenting85percent,92percent,and90percentoftotalhumanitarianflowsrespectively.
Donorgovernmentdirectgrants
90%
Pooledfunds(combined)
5%
Private3%
Other2%
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3.1.1Technicalefficiency
Thoughitvariesfromdonortodonor,overallthedirectgrantingmodalityisseenashavinghighertechnicalefficienciesintermsofpredictabilityandsufficiency(i.e.,largerandrelativelypredictablecontributions).Andwhilethetransactioncostscouldbehighforsomedonors’grants,thesedonorstendtobetheonesprovidinglargersums,sothesufficiency-to-transactioncostsratiocanremainfavorable.
Comparedtotheotherfundingmodalities,however,directgrantsareoveralllessefficientintermsoffundingspeedrequiredforrapidresponseandlowerstillforsubsidiarityefficiency—inthatdonorconstraintsoftenrequirethattheyfunneltheircontributionsthroughlargerchannels,regardlessofwhetherthisisthemostdirectandefficientwayforfundingtoreachtheactorbestplacedtoimplement.
Table1:AveragesfromsampledcontributionsinEthiopia,Iraq,andMyanmar(2015and2016)
Sizeofcontribution(USDmillions)
Days:proposaltoaward
Days:awardtodisbursement
Numberofiterationsinproposalprocess
Perceivedadministrativeburden:1(light)to5(heavy)
Bilateral(direct)grants 6.10 47 18 3 2CERF 1.70 10* 13* 5 4CBPFs 0.70 46** 28** 5 3
StartFund 0.16 2 0 0 1
Privategrants 0.18 2 3 0 2
*TheCERFSecretariatnotesinresponsethattheirdatabaseshow6daysfromproposaltoawardratherthan10and2daysfromawardtodisbursementratherthan13.**FCSdataonCBPFsshow39daysfromproposaltoawardand12daysfromawardtodisbursementTimeliness(speed/predictability)
Oneofthekeydrawbacksofdirectgrantinginsuddenonsetemergenciesisthatmostbilateralinstrumentsareusuallynotcapableofrespondingtosignalsandmobilizingwithinanacceptabletimeframetoenableatimelyresponse.Inoursamplethedirectdonorgovernmentgrantstookanaverageof47daysfromthetimeofproposalsubmissiontoawarddecisionandafurther18daysfromawarddecisiontodisbursementoffunds.
The2016droughtresponseinEthiopia—largeinscaleandwell-organized,withthegovernmentplayingakeyroleincoordinationandresponse—wasconsideredtohavebeenasuccessoverall,havingavertedsignificantexcessmortality.However,evaluationsidentifiedsomeseriousweaknesses,particularlyregardingtimelinessoftheresponse,includingdelayedarrivaloffunding(OCHA,2017).Intervieweescommentedonthedifficultiesinconvincingdonorcapitalsthatadeterioratingslow-onsetsituationwouldimminentlyrequirearapidresponse.Donordecision-
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makersunderstandverywellthelogicofearlymitigatingaction,butincaseswheretheyhavealimitedpotoffundstoallocatetoexistingacuteneeds,prioritizingnewneedswhicharelikelybuthavenotyetoccurredisanextremelydifficultcasetomake.Inaddition,thesedonorswillhavecompetingprioritiesandemergencieselsewhereintheworldtoconsider.
TheproposalprocessprovedtobethegreatestpracticalimpedimenttotimelinessindirectgrantinginEthiopia.Adonorissuesacallforproposals,andbythetimeproposalsaresubmitted,reviewed,amendedandcontracted,itiscommonforthreetofourmonthstohaveelapsed,ataminimum.Acrucialexceptionisincaseswheredonorscanmodifytheirexistinggrantagreements,or,similarly,whereintermediaries(UNagenciesorinternationalNGOs)canmodifyagreementswithlocalactors.Inthesescenarios,thistime-lagmaybealmosteliminated.DFID,forexample,wasthefirstbilateraldonortorespondtothecrisis,inJuly2015,anddidsobytoppingupexistingmulti-yearagreementswiththeiraid-providerpartners,obviatingtheneedforadditionalgrantprocedures.TheUnitedStatesandSwedenmanagedtodothesameandmovedfundingfromtheirdevelopmentbudgetstotheirhumanitarianbudgets.Thisarrangementplayedacrucialrolefortheoverallresponseandshouldbefurtherexplored.
HumanitarianactorsinMyanmaralsocontendedwithdelayedfundingresponsesinthe2015floodsthataffectedlargeareasofthecountry,includingthosewherehumanitarianswereengagedinongoingassistancetoconflict-displacedpeople.Delaysintheapprovalanddisbursementprocessmeanttheinternationalhumanitariancommunitytookupwardsoftwomonthstoproperlybegintheresponsetothefloodemergency.
Theslownessinbilateralfundingneednotbeinevitable,assomerareexamplesshow.DFIDhasgivenapprovalauthoritytosomelocalofficesforuptoGBP2million,forinstance,whichcanenablefundstobereleasedveryquickly—amodelwhichwouldservehumanitarianactiontobereplicated.
Wheredirectgrantsdohaveatimelinessadvantageoverothermodalitiesisinpredictabilityoffundingforlong-termchronicemergencyresponses.Forsuchfunding,donorstypicallyhavesetdisbursementschedulesaccordingtotheirfiscalyears,participateinpledgingconferencestosignalintentions,andhavelong-termworkingrelationshipswithoperationalorganizations.InIraq,thefundingarrangementsdeemedmostefficientbyoperationalactorsweredirectgrantsoflongdurationthattendedtobetiedtolong-standingrelationshipsthatincludedanelementoftrust.
Sufficiency/transactioncosts
Directgrantingscoreshigherinsufficiencythanmostotherfundingmodalities.Whileindividualgrantsrunthegamutfromverysmalltoverylarge,onaveragetheyareseventimeslargerthanallocationsmadethroughthepooledfundmechanisms.However,mostefficienciesarerealizedwhenthesizeofthegrantislargerelativetothecosttothegranteeinthetimeandadministrationburdentoobtainandadministerit.Andtheinflexibilityofsomeofthesegrantscanbeconsiderable.Severalhumanitarianorganizationrepresentativesspokeoftheproblemscausedbybeinglockedintonarrowbudgetlineitemsandstaffingplansfromproposals,hinderingthemakingofanynecessaryadjustmentsthatmayariselater.
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Theproposalprocessentailsanadditionalsetoftransactioncosts,alsorepeatedlyflaggedbyhumanitarianactorsasatimeburdenandinefficiency.TheGrandBargainandrecentresearchinitiatives(Rosellietal.,2016;Caccavaleetal.,2016)havedelvedintotheissueofreportingrequirementsandmadethecaseforharmonizedreportingformatsacrossdifferentdonors.
OFDAandECHOarelargelyconsideredtobeefficientsourcesofdirectgrants,despiteheavyadministrativerequirements(muchofwhichisenshrinedinlaw)andhighbarrierstoentryforgrantees.Afundingrelationship,onceitisestablishedandcompliancesystemsaresetup,becomesapredictable(iflabor-intensive)propositionwithahighbenefit-to-costratioandthusworththeinvestment.However,directfundingrelationshipswithhighentrycostsandlowflexibility(evenwithacceptablereportingcosts)wereconsideredlessefficientwhenthetotalamountoffundingwasrelativelylow.
Thedonorsperceivedashavinglow“entrycosts,”relativeflexibility,andlightproposalandreportingrequirementswereclearlyalsoperceivedbyhumanitarianorganizationsasthemostefficientsourcesoffunding(Switzerland,Norway,Sweden,andGermanywerenotedasexamples).(However,another,perhapslessvisible,formofentrybarrieriswhendonorspreferentiallygranttoINGOsbasedintheirowncountries,whichappliestosomeoftheabove.)
Fundingvolumeisnotalwaysofprimaryimportance,however,andhumanitarianactorsdonotalwaysviewsmallgrantsasinefficient.AsoneINGOrepresentativepointedout,thoughsmallgrantsarerelativelycostly,theycanattimesbeveryvaluableforallocativeefficiency“iftheygiveyoumoneyforsomethingyoureallywanttodo,andmayopenthedoorforotheropportunities.”Somethinginefficientintheshorttermcanthuspayoffinthelongrunaswellasaddothervalue.
InIraq,evidenceshowsthat,eventhoughtheyhaveefficiencyproblemsstemmingfromthecombinationofmultiplefundingstreams,operationalactorsprefercertaindirectgrantingarrangements.Highlydivergentadministrativeandreportingrequirementsbydifferentdonorswereclearlyandconsistentlycitedaskeyissuesforoperationalactors,andthenotionofasystemparalyzedbymultiplelayersofreportingrequirementswasraisedinmorethanoneinterview.Gulfstatedonorswerecitedbyagenciesasparticularlyproblematic,requiringextensivefeedbackanddetailedreporting.Therelationshipbetweenthedonorandrecipientagency,accordingtoonesenioragencyinterviewee“feelsmuchmoreunequal,andwedon’tunderstandwhatexactlytheywant.”
Economiesofscale
Withverylargebilateralgrants,economiesofscalecanbecreatedinthesamewaytheyarethroughpooledfundingallocationstolargeorganizations(UNagenciesormajorINGOs)andclusterleadstocoordinateandmanagelarge-scaleresponseswithmultiplepartners.Becauseofthegranular,fragmentednatureofthehumanitariansector,thisisoftentheonlyconceivablewaytoproduceresultsatscaleacrossalargearea/population.Forexample,UNICEF’s$1milliongrantfromOFDAforthe2015responsetotheRakhinecrisisinMyanmarallowedittoworkatscalethroughmultiplepartners.TheINGOIRChasconductedefficiencyanalysisoflatrine-constructionprogramsinEthiopia,findingthat“thedifferenceincostperperson-yearoflatrineaccessdiffered
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morethantwentytimesbetweenthesmallestandthelargestprograms.Thisisroutinelytrueacrossprogrammingsectorswhichincurfixedcosts,”suchaswaterandsanitation,andlesstrueforsectorslikeprotectionwhicharestaff-intensive.6
3.1.2Allocativeefficiency
Flexibility
InMyanmar,manyofthechiefcomplaintsaboutdirectgrantfundingrelatedtothosegrantsthatdidnotallowtheflexibilitytomakenecessarychangesmidstream.FortheinternationalRedCrossmovemententities,earmarkedgrantsatthesubnationallevelmeantafarmorerestrictiveformoffundingandonewhichleftthemwithunderfundedneeds,suchaslogistics,thatmostdonorsfeltweretoo“unsexy”toresource.AnINGOrespondentalsoquestionedsomedonors’insistencethattheyhireadditional(muchmorecostly)senior-levelinternationalstaff“for‘accountability’purposes.Youbegintoquestionhowefficientthisis.”
Thetwolargesthumanitariandonors,theU.S.governmentandECHO,arerelativelyrestrictiveaccordingtotheirofficialguidance.However,withthehelpofdonorfieldofficers,partnerscanextractmoreflexibilityfromtheofficialrules.Forexample,OFDAadvisespartnerstousebroadergeographicaldelineationsratherthanhighlyspecificlocationsandtoinclude“trip-wires”ortriggersandthresholdsforresponseoradaptionwithouthavingtorequestaformalmodificationtothegrant.ECHOrequiresalotofdetailintheproposalpreparationstageandisrelativelyinflexiblewhenitcomestoadaptingprogramswithoutundergoingatime-consumingmodification.However,partnersareallowedavarianceacrossbudgetlines,providingspendingflexibility.Constraintsonpurchaseofdrugswerefelttobeoneofthemostrestrictivedonorconditions,whichappliestoboththeU.S.andECHO.TheU.S.hasextensiverestrictionsondrugprocurement.ECHOmeanwhilerequiresinternationalprocurementtomeetitsorganizationalqualitystandards,whichcantakeuptosixmonths,includingshipping,customsclearance,andinternaltransportinsomecontexts.Mostorganizationsconsiderthisimpossibleforrapidresponse.Therefore,organizationsmayoftenhavetoseekalternativefundingforprocurementofdrugsandmedicalsuppliestoworkaroundtheU.S.’sandECHO’srestrictions.
Subsidiarity(localization)
Putsimply,localNGOscanoftenoperateatlowercostandclosertocommunities,whichinmanycasescanbemoreefficient(aswellaseffective)forhumanitarianresponse,buttheylackdirectaccesstofinancialresourcesofthesortinternationaldonorscanprovide,butforthemostpartdonot.Whiletheneedforgreaterlocalizationofhumanitarianresponse,wherepossible,wasaprominentthemeattheWorldHumanitarianSummitandintheGrandBargain,donorgovernmentshavetodateofferedupmorerhetoricalsupportforitthanconcreteaction.DonorsinMyanmar,forexample,spokeofageneral“consensustofundasdirectlyandaslocallyaspossible,”withone
6CommentprovidedtothestudythroughtheAdvisoryGroupreviewprocess.Dataavailableathttps://www.rescue.org/report/cost-efficiency-latrine-building-camps.
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donorrepresentativesayingtherewas“noreasonwhy10yearsfromnowinternationalorganizationsshouldstillbestillrunningtheshow,”butthesesentimentshavebeenslowtomaterialize.Fairlyorunfairly,accountabilityrisks(oftencementedindonors’operationalregulationsorevenindomesticlegislation)preventmanydonorgovernmentsfromfundingnationalaidorganizationsdirectly.Inthewordsofonedonorinterviewee,“Woulditbemoreefficienttogodirecttothebottomline(localproviders)?Possibly—butwedon’thavethecounterfactualbecausewearenotwillingtotakethatrisk.”
Somesignsofincrementalchangeinthisareaarevisible,however.USAID/OFDAcurrentlyfundsonenationalBurmeseNGOdirectly—anorganizationcalledMetta,whichhadtheinstitutionalcapacitytoundergoandpassarigorousorganizationalaudit.Someinitialpracticaldifficultiesofthisnovelarrangementstemmingfromregulationssoonbecameevident,includingproblemsmakingbanktransferstotheNGOin-country.Intervieweesalsonoted,asencapsulatedbyonerespondent,therisksometimesbornebyhighperformers:“WhendonorsfindastronglocalNGO,theytendtogivethemalotofmoney,makingitdifficultfortheNGOtohandlelargescalegrowthinashortperiodoftime,whichsometimescreatesperformanceissues.”
ItisnoteworthythatOFDAisamongthemostoperationalofdonors,withgreatercapacityforindividualgrantmanagementinthefieldthanmany.Fordonorswithsignificantresourcestospendbutlimitedstafftodeployinthefield,theincentiveistowritelargergrantsforfewerprojects.Forthistheyrequirepartnerswithlargecapacitytoeitherimplementormanagesub-grantees.Thisofcoursemilitatesagainstdirectfundingofsmalleractorsandhenceagainstlocalizationeffortsandsubsidiarity.
Addedvalue
Thedonorsthatwereheaviestintermsofadministrativerequirementsandtransactioncosts(OFDAandECHO)werealsonotedbytheirgranteesashavingaddedsomesignificanttechnicalvalue.AnINGOintervieweegavearecentexamplewheretheOFDAstaffinNigeriawerewellversedinboththecontextandtechnicalaspectsofprogramming,andsocouldmeaningfullycontributetoandimproveprogramdesigns,andafterthedesignphasewerehandsoffintermsoftheimplementation,“whichisareallygoodbalance.”
IntervieweesinMyanmaralsospokeofgovernmentbilateraldonorssuchasDFIDandOFDAasaddingvalueandarguablypromotingallocativeefficiencybytakinga“portfolioapproach”totheirfunding,wheretheirdifferentgranteesprovidedifferentadvantagesandcomplementeachother’seffortsintheaggregate.However,evenwithdonors’attemptstocoordinateandensurecoverageorcomplementarityintermsofsectors,inpracticebothneedsassessmentandcoordinationareimperfect,efficiencymetricsarelimited,andfundingisawardedprimarilytoknownandtrustedpartnerswithcapacity,accessandtrackrecords.
3.2Bilateralgrantintermediaries
Asubsetofefficiencyissuescomeswiththegrantswithmorethanonelinkinthetransactionchain,i.e.,thataresub-grantedfromtheprimaryrecipientagencies(UNorlargeINGOs)tosmaller
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operationalactors.Thesetendtobeslowerandentailgreatercumulativetransactioncosts.However,theycanattimesbejustifiedbytheirallocativeefficiencybenefitsandthetechnicalorlogisticalvalueaddedbytheprimaryrecipientagencytotheimplementingpartners.Inotherwords,therightrelationshipwithanintermediarycanoffsettechnicalefficiencylossesbyaddingallocativeefficiencyandultimatelyenhancingeffectiveness.Particularlyforsmalllocalactorsthatundertakehumanitarianinterventionsinfrequently,thevalueaddedinsustainedmentoringrelationshipswithINGOsorUNagencies,whentheseareofhighquality,canbesignificant.
Forthethreecasesstudied,intervieweescriticizedthesearrangementsascumbersomeandthevalueaddedasminimal.Thesearrangementsweredeemedparticularlyinefficientwhentheywereusedtodeliverprojectsthatinvokedtheconceptof“provideroflastresort.”Forexample,aUNagencywasrequiredtosub-contractacertaintechnicalinventionthroughapartnerundercircumstanceswheretherewasnoestablishedrelationshipwiththepartnerandthepartnerwasaskedtoworkinanarea(“thematic”or“geographical”)whereitwasnotalreadyestablished.
3.2.1Technicalefficiency
Becausemorethanonesetofproposalreviewandrevisionproceduresusuallyexist,aswellasadditionallinksinthechainthatmoneymovesalong(entailingadditionaltimeonthepartsofboththeorganizationsandtheirfinancialinstitutions),thetimelinewillbelongerforamulti-linkcontribution,evenbarringsnagsalongtheway.Differentintermediarygrantershadvaryingreputationsforbeingrelativelyfastorslow,withUNICEFcominginforthegreatestamountofcriticisminthisarea.Totheagency’scredit,staffhaverecognizedtheproblemwithbothspeedandflexibilityfortheirpartners(moreonthisbelow)andareworkingtoaddressit.Partoftheproblemmaybeanorganizationalmindsetwhereagenciesdonotperceivethemselvesas“donors”—whichinpracticetheyincreasinglyareinthesecases—andthusarenotattunedtogooddonorshipprinciplesandhowtheyshouldapplytotheirpartnershipswithsub-grantees.
InthecaseofIraq,undercertaincircumstances,partnershiparrangementsbetweenUNagenciesandpartnerswereseenassimilartoefficientpartnershipswithefficientdonors.Again,thekeywastheestablishednatureoftherelationship.Inonecase,theINGOpartnerhadlongsinceacceptedthattherulesoftherelationshipwererelativelyrigid,buthavinglearnedtherulesandacceptedthem,adegreeofflexibilitywasinherentinimplementation.OnelocalNGOreferredtoaflexibleandefficientpartnershipwithUNICEF,basedonalong-standingrelationshipandadegreeoftrust.Inotherinstances,however,partnershaddeclinedfundingfromUNICEFandUNHCRbecauseofinefficiency(overlyhighentryandtransactioncosts).Indeed,moreoftenthannot,INGOpartnerssawlittleornoaddedvalueinUNsub-contractingfortheirindividualorganizationsandprogramming,whereasdonorsfeltthatpassingmoneyviaUNagencieshadcreatedeconomiesofscaleinprocurementandcoordination.AkeyissueforthemappearedtobetheUN’sspecialrelationshipwiththeIraqigovernment.
AnintervieweefromonemajorNGOreported,“AlotofthetimewithUNgrantsitactuallycostsustoaccepttheirsub-grants,becausetheydon’tprovideenoughinoverheads.”Thiswasnottheonlyorganizationrepresentativeinterviewedthatspokeofoccasionallydecliningsub-grantsforinefficiencyreasons.ThesituationismoredifficultforlocalNGOs,whicharenotaffordedthe
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customary7percentoverheadcostsgiventoINGOs.InMyanmar,thejustificationgivenwasthatINGOshaveglobalHQcostswhichneedtobecontributedtowhereaslocalNGOsdonot.Oftentheselocalorganizationsareallowedtochargemarginsontheirdirectcoststopayforinstitutionalexpenses,butbynomeansalways.Thisresultsintheend-chainimplementerofthegrantreceivingtheleastinindirectcostrecovery,whiletheintermediariesreceivethemost,ininverseproportiontotheirproximitytotheactualprogram.ThelackofsufficientoverheadforsmallerandlocalNGOscontributestothestuntingeffectthatthefinancingsystem—particularlythebilateralgrantmodality—imposesonthem.Smallorganizationstendtogetsmallgrants,whichnotonlyhavetheproportionallylargesttransactioncostsintermsofreporting(Caccavale,Haver,&Stoddard,2016),butalsomaketheleastavailabletotheorganizationtofundthecapacityneededtomeetthosecosts.Ratherthanusingeachsuccessivegranttobuildthecapacitytogrow,thenationalNGOsattheendofthetransactionchainremainsmallandoperatehandtomouth.
Somerepresentativesofintermediaryagencieshavesaidthattheyarerequiredbytheiroriginaldonorstodemandacertainlevelofcompliancefromtheirsubcontractors,anduntilandunlesstheyreceivemoreflexibilityfromdonors,theirhandsaretied.OneUNagencyrepresentativethatparticularlywhenthesubcontractorisalocalorganization,thedemandsbecomemorestringentasthedonorstrytoextendtheirriskmitigationefforts:“Themorewetalkaboutlocalization,theconditionsaregettingmoreandmoregranularintermsofwhatwemustgivebacktoourdonors,soitisnotefficientforus.”
Whetherdonor-drivenornot,thehighertransactioncostsforsubcontractorsversusprimaryagencyrecipientisrealandwell-known.The“LessPaperMoreAid”reportfoundthat“overallUNagenciesrequiremorefrequentreportscomparedtoinstitutionaldonors.OnaveragetheUNagenciesexaminedrequiredaminimumofsixreportstoamaximumofeightperyear.Theinstitutionaldonorsexamined,requiredonaverage,aminimumoftworeportstoamaximumofsixperyear”(Roselli,Fabbri,&CollingwoodEsland,2016).Similarly,arecentHumanitarianOutcomesanalysisfoundthat“reportingrequirementsarefarlessonerousforUNagencies.Thisdifferenceisduetothefactthat(1)donorsdonotplayaroleinthegovernanceofNGOsandhencedonothelpshapetheirinternalaccountabilitymechanismsashappenswith[UNagencies];and(2)NGOfundingismorefrequentlyconnectedtospecificprojects(i.e.,earmarked)andthereforeisseentorequiredetailed,project-specificreportingtoensureaccountability...”(Caccavale,Haver,&Stoddard,2016).
Theissueofagencyoverheadisoneofthemorecomplexexamplesoftransactioncoststohumanitarianfundingandoneofthemostchallengingtomeasure.Acertainamountofindirect,institutionalfundingtosupportandsustaintheorganizationanditsactivitiesisofcourseanecessity,particularlyifsaidorganizationreceiveslittleornocorebudgetsupportfromdonors.Thisbecomeshardertojustifywhenlongmulti-levelgrantingchainsseepercentageswithdrawnateachlevel,leavingultimatelylessmoneyfortheaidrecipient.Previousstudiestacklingtheissueofagencyoverheadhavestruggledwiththefactthatthereisnosinglecommondefinitionoraccountingformulafortheseindirectcosts,andcomparingdifferentactors’costsislikecomparingapplestooranges.Forthisstudy,wetookadeliberatelysimplerapproachofusingagencyself-reportedfigures(i.e.,thepercentagestakeninoverhead,asdefinedbytheagenciesthattookthem)
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oneachcontributiontransactionchainstudied.Whatthisshowedwasthatdirectgrantswithnointermediarieslost11percentonaverageinoverhead,comparedtoacumulative14percentonaveragefortwo-linktransactionchains.Bythemselvesthesefiguresarenotinstructive:Itstandstoreasonthatmultiplelinkswillamounttomoreoverheadwithdrawnfromtheprincipalamountremainingforprogrammingactivities.However,itbecomessomethingtoconsideragainstthequalitativefindingsinthefieldonwhethertheintermediariescreatedeconomiesofscaleoraddedvaluetotheprogramming.
3.2.2Allocativeefficiency
Intermediaryfundingorganizations,whetheraUNagencyorlargeINGO,cantheoreticallycreatesystem-levelefficienciesandaddvalueinthe“middle-man”roleofahumanitarianresponseinavarietyofways,forexample,by
• coordinatingmultiple,geographicallydispersedeffortsunderasingleprogramtowardcommonoutcomes;
• assistingadvocacyeffortsandaccessnegotiations;• providingtechnicalexpertiseandguidanceandoverseeingstandardsinprogramming;or• directlyandindirectlyhelpingtostrengthencapacityofsmallerpartnersthroughtechnical
assistance,training,andbeingaconduittointernationalpublicandprivatefundingotherwiseinaccessible.
Ofcourse,theextenttowhichintermediariesaddvaluedependsonhowlimitedthecapacityofsub-granteesare—andtheintermediary’sownlimitations.InMyanmar,forinstance,WFPhasrobustsupplychainsandprocurementpipelineswhichcreateeconomiesofscaleinRakhineState,butcurrentlycannotbringphysicalcommoditiesintoKachin,solocalorganizationsaretakingonalargerindependentrolethere.
InEthiopiaaswell,UNagencieswereabletorealizeeconomiesofscale,whichisakeyconsiderationfordonorsinacrisiswherelargenumbersofpeopleareaffected,wheretheresponseiscommodity/logistics-heavyandwherelargegeographicalareasneedtobecovered.OnedonorcommentedthatwhentheyfundWFP,theyknowthattheycanmovequicklyandatscale,evenbeforetheyhavesignedanagreementbecausetheyhave“deeppockets”andestablishedsystems.ThatUNagenciesalsohaveestablishedrelationshipswithgovernment,whichhelpstofacilitatemoretimelyresponse,wasalsonotedasanadvantage.InadditiontotheestablishedroleofUNagenciesinclustercoordination,governmentliaisonandtheirabilitytocoordinateresponsesatscale,itisimportanttorememberthattheseagenciesaremandatedtobepresentinhumanitarianemergencies,whereasNGOpresenceisvoluntaryandhighlyvariable.
Asmentionedabove,thebulkofhumanitarianfundinggoesthroughbilateralgrantsfromlargegovernmentdonors.Andmostofthesedonorsareunableorunwillingtogranttonationalorganizationsdirectly,leavingaverythinsliceofthepieavailableforlocalactorstoaccesswithouthavingtobesubcontractedbyaninternationalorganization(mainlyCBPFallocationsandgrantsfromprivateorganizations).Whilewesawabovethatallocativeefficienciesresultingfromeconomiesofscaleandvalueaddedcanbebroughttobearincertainsituations(andgenerallyare
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farmoreappreciatedbydonorsandlargeagenciesthanbytheNGOcommunity),unquestionablyinsomecasesthevalueaddedislackingornotcommensuratewiththetransactioncostsgenerated.AlocalNGOrepresentativeinMyanmaropinedsuccinctly,“Efficiencyisdeliveringintheshortesttimewheremostneeded.Bureaucraticmechanismswhichaskfortoomuchinformationareinefficient.”
Notallintermediaryorganizationscameinforcriticism.CaritasInternationalisreportedlyverylightonreportingandquiteflexibleintermsofchangingprogrammingmidstreamasneeded;OxfamaddsvaluethroughinformalsupporttogranteesapplyingtotheMyanmarHumanitarianFund.WFP,incontrasttootherUNagencyintermediaries,occasionallyreceivedsomepraiseas“astraightforwardcontract,veryfamiliar,goodmechanism,negotiatedlocally.”Thissuggeststhatorganizationsthathavebeendesignedfromtheoutsettoworkthroughpartnershipshaveworkedoutsomeefficienciesthatothersmayyetlack.
Atpresent,thelackofclearandreadilyavailableinformationonsub-grantinghindersthoroughanalysis.FTShasonlybeguntotrytocapturesecondaryandtertiarylevelsofgrantingintheirdatabaseasofthisyear,andinmanycasestheoriginaldonorsthemselvesarenotawareofwhatpercentageoftheirgrantsweresub-grantedtolocalNGOs.Asonedonorsaid,“Whenweaskedourpartners,theystruggledtotellushowmuchtheywerechannelingtolocalorganizations,andsecondly,itwasn’tthepartnersweexpected.ICRCendedupbeingourlargestsupporteroflocalpartners!”
3.3Global-levelpooledfunding(CERFandStart)
Sinceitsexpansionin2006,theCERFhasfunctionedtoproviderapid-responsefundingtosuddenonsetemergenciesandtofillgapsin“under-funded”emergencies.Withfundinglevelsclosetoits$500milliontargetforthepastfewyears,theCERFisnowanticipatedtodoubleinsizeto$1billion,followingcommitmentsmadeattheWorldHumanitarianSummitandendorsedbytheGeneralAssembly.Bydesign,theCERFexiststocreatebothtechnicalefficiencies(movingmoneyrapidly)andallocativeefficiencies(fillinggaps).Anestimated50percentofCERFfundsareusedtoprocurereliefitems.3.3.1Technicalefficiency
Timeliness(speed/predictability)
Regardingspeedofresponse,theCERFhasshownthatitcanmakeveryrapid(evenwithin24hours)decisionsanddisbursements.InEthiopiaforexample,theCERFwasnotedtohaveprovidedaverytimelyinjectionofcash,withanallocationinNovember2015,beforeotherdonorshadmobilized.CERFalsoallowsback-datingrequestsuptosixweekssothatagenciescanbeginprogrammingwiththeirinternalreservesassoonastheyareconfidentthattheywillreceivetheCERFallocation.
Whereproblemsarise,however,isonthefrontandbackendofthetransactions,withdelaysoccurringinthepre-proposalsubmissionprocessandfollowingtheinitialdisbursement.IntheMyanmar2015floodresponse,CERFfundstookanaverageof30daystoreachthesecondary
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(implementing)agencies,whichislengthywhendealingwithfirst-responseneedsinasudden-onsetemergency.
ManyintervieweespinnedpartoftheblameforthisonCERF’spreferenceforreceivingjoinedupagencyapplicationsratherthanconsideringseparateproposalsastheycomein.Whilethisismeanttopromotestrategiccoordinationofactivities(anexampleofaddingvalueandallocativeefficiency),itmeansthattheapplicationprocessmovesasfastastheslowestmember,andobserversnoteanelementof“piesharing”isclearlyatplayaswell.Moreover,intervieweeswerenotconvincedthattheextratimetakentocombineproposalsinfactenabledprioritizationandplanning.AUNrepresentativeinthefielddescribeditas“creatingachapeaudocumentandinventingastrategicoverlayafterthefact.”AndsincetheCERFsecretariatstillneedstoreviewalltheseparateproposals,itdoesnotsavetimeatthegloballeveleither.
Beyondthedelaysintheproposalprocess,incaseswheretheprimaryrecipientagencymovesslowlytocontractpartnersandbecomesabottleneckforsub-grants—afrequentoccurrence—monthshavebeenknowntoelapsebeforethemoneyhitsthegroundforthestartofprojectactivities.Giventhatgrantsaretypicallysmallinvolumeandofshortduration,thetimelinessinefficienciesofsuchinstancesareclear.ForonesuchallocationinMyanmar,afterdelaystheNGOadvancedotherfundstostarttheproject.Butsincemanyimplementerslacklargeadvancereserves,thisisoftennotpossible.ThiscomponentofthedelayisnotthefaultoftheCERFmechanism,butratherlieswithinternalagencyprocesses.
TheStartFundisthefinancingcomponentofa“collectivelyowned”networkofNGOs(41internationaland6national),whichwasspecificallydesignedtomovefundingfastertoenablearapidresponseontheground.Start’sownglobaldatareportsacall-to-disbursementtimeofthreedays.Thisboreoutinoursample(albeitofonlytwoStartcontributions),wherethedisbursementtimewastwodays.Significantly,however,theStartFundisalsoamuchsmallermechanismthantheCERFanditsgrantsarerelativelysmallsumsofmoneyforsmall-to-mediumemergenciesthatreceivelittleinternationaldonorattention.Whileitisgearedforrapidresponse,itisnotlookingtosupportmajorcoordinatedresponsesatscale,astheCERFis,andthereforecannotbemeasuredbythesameyardstick.Indeed,itsrelativeefficienciesmaybelargelydependentonitslimitedsizeandremit.
Sufficiency/transactioncosts
AlthoughtheCERFiswithinthepurviewoftheUN,theyareadmittedlyunaccustomedtotherelativelystringentearmarkingandaccountabilityrequirementsattachedtoCERFgrants.Particularlywhenthegrantamountswererelativelysmall(inourthree-countrysurveytheyaveraged$1.7million,butsomewereassmallas$300,000),recipientagenciesfoundthisasourceoffrustration.Indeed,manyCERFallocationsrepresentedafractionofwhattheagencyoriginallyproposedfortheactivities(10percentinthecaseofoneinstanceinMyanmar),andthebalancehadtobemadeupfromotherdonors,creatingmoreworkandtimedelays.
Inadditiontoaspeedydisbursementmechanism,theStartfundalsohadthelightestperceivedtransactionscostsandadministrativeburden(onafive-pointscalewith1beingthelightestand5
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beingheaviest,itscoreda1,ascomparedwitha4fortheCERFanda3fortheCBPFs).Atthesametimeofcourse,itsdisbursementsarethesmallestonaverageofanyofthemechanismssampled,includingprivatecontributions(whichaveraged$157,000inoursample).
3.3.2Allocativeefficiency
Throughthe“underfunded”window,theCERFfillsgapsresultingfromthefragmentednatureofthebilateralgrantingsystem.However,thefactthatUNagenciesarethesoledirectrecipientsofitsallocationsmeansthattheCERFcancometobeusedasasafetynetandsharedresourceratherthanastrategicinput.InMyanmar,CERFfundrecipientsspokeofbeingaskedtoputinonlyacertainpercentageoftheirprojectrequirementssothatallappealingagenciescouldgetashare.
Subsidiarity
BecauseitonlyfundsUNagencies,theCERFcannotdirectlyfacilitategreatersubsidiarityefficiencywhenlocalNGOcapacitiesmakethispossible.AlthoughasizablepercentageoftheCERFallocationsendsupinthehandsoflocalNGOs,thereisnoevidencethatthisisanydifferentfromwhathappenswithbilateralgrantsthroughintermediaries.
AlthoughtheStartFundhasrecentlyaddedmorenationalNGOmembers,itisonlybeginningtothinkabouthowtomorestrategicallyapproachthequestionsoflocalizationandsubsidiarity.Arguablybymakingsmallgrantsdirectlytoimplementersontheground,itismakingsomesubsidiaritygains,butbecauseitisamembers-onlyproposition,thereisnowaytoensurethattherightactorattherightlevelcanhaveequalaccesstoitsresources.
Addedvalue
Coordinationasanaddedvalueisaprincipalobjectiveofpooledfundingandmostintervieweesdidallowthatthishasbeensomethingthatthesemechanismscanandhaveachieved,bybothincentivizingandhelpingtostructurecommonplanningprocesses.TheStartFundhasalsonotedthatitsabilitytoleveragefundingtocatalyzeresponsestootherwiseforgottencrisesisaconsiderableaddedvalueaswell.
3.4Country-basedpooledfunds
Donorsacknowledgethatevaluationsandanecdotalevidencestronglyindicatethatcountry-basedpooledfunds(CBPFs)areimprovingyearbyyearandbecomingreasonablyefficientandeffectivefundingmechanisms.Asbilateralgrantsledthesurgeinfundingoverthepastfewyears,however,pooledfundsarebecomingasmallerandsmallerpercentageofthetotalfundingpoolandarguablylessrelevantandlessabletoleveragecomparativeadvantageandaddvalueaspartofadiverse“fundingecosystem”(Stoddard,2017).
Unliketheglobalpooledfunds,theCBPFs’performanceistiedtothatofthecoordinatedhumanitarianstructuresineachcountrywheretheyoperate.PoorhumanitariancoordinationinacountrycanhinderCBPFs,butconversely,well-runandwellappliedCBPFcanhelptostrengthencoordinationstructuresbyincentivizingactorsandunderpinningastrategicplan.InEthiopia,the
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qualitativeevidencesupportstheclaimthattheCBPFprovidesanefficiencybenefitatthestrategic,systemlevel.ThiswasnotthecaseinIraq,wheredifficultiesarerootedinbroadercoordinationfailure—clustersnotfunctioningwell,disagreementonapproach,andsevereproblemsinhumanresources.
3.4.1Technicalefficiency
Timeliness(speed/predictability)
TheCBPFshaveshownvariableperformanceintermsofrapidityoffunding,thoughtheytypicallyimproveovertime.Onaverage,pooledfundsaretwiceasquickasbilateralgrantsfromtheproposaltodecisionstage,thoughtimelinessefficienciescanbelostinthedisbursementphase.
EfficiencyisakeyprincipleelaboratedinthestandardizedCBPFguidance(aswellasinclusiveness,transparency,accountability,andtimeliness),andthestatedgoalistoenableatimelyandstrategicresponsetolocallyidentifiedneeds(UNOCHA,FundingCoordinationSection,2016)whileminimizingtransactioncostsandmaximizingtransparency.
TheCBPFinEthiopiainthepastpre-positionedsmallamountsoffunding(around$20,000)withagenciestoallowthemtorespondimmediatelytorapidcrisesbasedonaphonecalloremailapproval.Althoughintervieweesreportedthishadasubstantialimpactinthefirsthoursanddaysofacrisisforarelativelysmallamountofmoney,itwasdeterminedtobetoohighacorporateriskforOCHAtocontinue.
Asdiscussed,timelinessisnotjustafunctionofspeed;itis,moreimportantly,makingsurethatmoneyisavailableattherighttimes,whichinthecaseofEthiopiaareeasytopredict.Inmanycases,fundingcyclesfollowdonoradministrativeyears;however,thisimpactsdirectlyontheabilityoftheCBPF(knownastheEthiopiaHumanitarianFundorEHF)tomakeallocationsinsyncwiththeseasonalcalendar.TheEHFtypicallyreceivesalargevolumeofcontributionsinDecember,asdonorslooktoallocateunspentfunds.ThesefundsarerolledintotheEHF’sfollowingallocationyear,whereuponthesizeoftheEHF’sendofyearbalanceisquestionedbydonors.
TheMyanmarCBPF(orMHF)hashadarockyinceptionandbymanyaccountsisstillnotperformingoptimally,althoughitisreasonablywellfundedanddonorsgenerallysupportitsrole.Agencyintervieweescomplainedthatitisslowtodisburseandcumbersomeintermsofitsprocesses.ThemaincomplaintswerethatitisinflexibleandnotsufficientlyaccessibletolocalNGOs(anexamplecitedwasthatapplicationsmustbemadeonlineinEnglish—requiringbothreliableinternet,whichisoftennotthecaseinMyanmar,andlanguageskills).Mosttellingofitschallenges,theMHFtookbetweentwoandthreemonthstodisbursesomegrantsforthe2015floodresponse.
Sufficiency/transactioncosts
CBPFsgrantstendtobequiteabitsmaller,onaverage,thaneitherbilateralorglobalpooledfundgrants.Inpartthisisbydesignaccordingtotheirfundingobjectives(addressingsmaller,discretecrisesandfundingsmaller,localorganizationswhentheyarebestsuitedtorespond).But,as
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previouslydescribed,thesmallerthegrant,thelargertherelativetransactioncosts,whichareallthesameintheCBPFsystemnomattertheamountofthegrant.Infact,inMyanmarseveralintervieweesreferredtotheMHFastheheaviestofanyfundingtheygetintermsofadministrativeburden.(Forthisreason,somediscussionhasoccurredinOCHAonsettingaminimumgrantsize.)ItisnonethelessafundingsourcewhichNGOscontinuetoapplyto,oftenknowingthattheprocesswillbepainful.
ThefinancingsysteminEthiopiaisexcessivelycomplexgiventherelativelypredictablenatureofneedsandtheestablishedpresenceofhumanitarianactors,responsemechanisms,coordination,andprioritizationprocesses.Bilateraldonorstendtocreatenewmechanismsaswork-aroundstobureaucraticimpediments,whichmayshortendisbursementtimeswhileaddingtotransactioncosts,andmanyrespondingactorscomplainedofhighlyfragmentedportfoliosandhightransactioncostsassociatedwithnavigatingcomplexnetworksoftransactions,relationships,andinstruments.
3.4.2Allocativeefficiency
Flexibility
Accordingtointerviewees,theproceduresandgrantmanagementmechanismsfortheCBPFswerenotparticularlyflexiblewhenitcametomidstreammodifications(inthatformalchangesmustbemadetotheonlinesystem),buttheywerenonethelessabletobechangedwhenneeded.
Amoreextensivenotionofflexibilityefficiency,however,hastodowithusingafundingmechanismtorespondtochangingneedsasandwheretheyoccurwithoutbeinghamstrungbybureaucraticorproceduralconstraints.TheCBPFsaretypicallytootightlycircumscribedintheirroletoactnimblyandflexibly,despitetheiraspirations.However,theycanfillgaps,forinstancebyprovidingfundingforneglectedemergencies(suchassmall-scalenaturaldisasters)withinlargercrisiscontexts.
Subsidiarity
TheCBPFsstartedtopreferentiallyfundNGOs,andparticularlynationalNGOswhenpossibleandefficient/effectivetodoso.BecausesomedonorsinMyanmarmustgothroughtheMHFtofundlocalactorsbecausetheregulationswon’tallowthemtoprovidedirectfunding,onecouldarguethatsubsidiarityispromotedbytheexistenceoftheCBPFfromwhichnationalorganizationscanapplyforandwintheirowngrantsasopposedtoworkinginpartnershiparrangementswithinternationalactors.Itmaybesubsidiarity“onceremoved”butitisstillawaytoreducethenumberoflinksinthechainwhenthisisdesirable.
TheIraqHumanitarianFund(IHF)highlightedthechallengesofearmarkingfornationalNGOswithinpooledfunds.InlinewithdonorcommitmentstolocalizationintheGrandBargain,donorshavepressuredtheIHFtoopenaspecialwindowfornationalNGOs.Thisrunscontrarytothegloballevelunderstandingthatcontributionstopooledfundsmaynotbeearmarked.Asaresult,thesecontributionshavebeenthesubjectoflengthynegotiationswithOCHAandinefficientonthesupplysideoftheIHF.
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OnenationalactorinIraqnotedthatcontributionsfromthepooledfunddidnotmeettheirowndefinitionofefficiency;i.e.,fundswereofshortduration,hadhighreportingcosts,andallowedforonlyminimalsupport(overhead)costs.Moreover,thefundingdeliveredbytheIHFwasnotaccompaniedbyasustainedrelationship,withcapacitybuildingaroundfinancialmanagementandreporting,thatthepartneracknowledgedtheyneeded
Addedvalue
AninternalOCHAreportontheCBPFspresentsthreebroadwaysinwhichtheycanaddvalue:
1. CBPFscanprovidefundingtolocalNGOsthatmanydonorsareunabletododirectly.2. CBPFssupportmulti-yearplanning.3. CBPFsfundingcanbe“strategicallyandtimelyallocatedinawaythatpromotesahigh
degreeofcoordination,quality,accountabilityandtransparency”(UNOCHA,2016).
Intermsofthethirdpoint,notallactorsexpressappreciationfortheuseoffundingmechanismsasleverageforparticularstrategicorcoordinationends.Agencieshavecomplainedofdonorscolludingwiththemanagersofthepooledfundstoincentivizeactorstochangetackandworkinareasthattheydeemunderserved—perceivedasgainsayingtheagencies’judgementonwhereandhowtoprogram.
3.5Consortiaandframeworkagreements
Intermsofspeedandlimitedtransactioncosts,bilaterallyfundedinstrumentsinvolvingprearrangedpartnerscanbequitetechnicallyefficient.Largebilateraldonorscanestablishtheseentitieseitheratthecountrylevelorglobally.AnexampleisDFID’sRapidResponseFacility,whereagroupofUK-basedNGOsareonstandbyagreementstoproviderapidresponsetosudden-onsetdisasters.Whentheyworkwell,theseconsortiaandframeworkagreementsareconsideredthesecondorthirdfastestwaytomobilizemoney(afterinternalreservesandtheStartFund).Mostdonorsandorganizationsinvolvedinsuchbodiesaregenerallyhappywiththearrangements,althoughtheresearchersdidheartheoccasionalobservationfromNGOrepresentativesthattheydon’talwaysdecreasetransactioncosts,duetotheamountofinternaldiscussionrequired.Insomecases,includingaframeworkagreementinMyanmar,forNGOstheyaresimply“amarriageofconvenience”andawayfordonorstoshifttheadministrativeandmanagementburdendowntheline.
Atthegloballevel,passingfundsfromaffiliateofficestooperationalINGOentitiesatthecountrylevelisacommonpractice,andonenotoftendiscussed.SavetheChildrenSwedenforexample,willcontractfundsfromSidaandpasstheseontoSavetheChildrenInternationalinEthiopiatocarryoutchildprotectionprogramming.Theaffiliatethatreceivesthegrantfromitshomedonorwillchargeapass-throughfee,insomecasesaddingabudget-lineforits“addedvalue”activities.Theefficiencyofthesepracticesisrarelyquestionedbydonorsorimplementingorganizations,despitethecleartransactioncoststhatcouldhavebeenavoidedhadthedonorfundedtheimplementingaffiliatedirectly.
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Mostdonorsseeconsortiaasameansforreducingtheirmanagementoverhead,andsothetrendistowardsmanagingfewergrants.ButthismilitatesagainstprovidingmoredirectfundingforlocalNGOs—howthetensionbetweenthesetwoobjectiveswillbemanagedisunclear.NeitherishowgrantapplicationswillbemademoreaccessibletolocalNGOswhilemaintainingcurrentstandardsofduediligence.Donorsmanagingtoomanygrantsexperiencebottleneckswhichslowdowngrants.
InMyanmar,theHumanitarianandResilienceProgramme(HARP)isauniqueframeworkfundinginstrumentdesignedbyDFIDtofunnelallitsgrantsinthecountry(exceptthosethatgothroughthepooledfunds)intoasinglecontractmanagedbyCrownAgentsandcombiningbothhumanitarianandresilienceprogramming.TwonotablenoveltiesareHARP’sabilitytofundlocalNGOsdirectlyandonamulti-yearbasis.Thisdecisionwasreportedlydrivenbyefficiencyconcerns,inacontextwheretheneedsarediverseandfarflung,requiringmanydifferentpartnersformanydifferenttypesofwork,withthevarietyofaccesschallenges.
3.6 Corefundingandinternalinstruments
Someofthemostresponsiveandcost-efficientfinancinginstrumentsarefoundintheinternalfinancinginfrastructureoflargehumanitarianorganizationsandassuchareoftennotvisiblewithinofficiallyreportedfinancingdata.
ThemajorUNhumanitarianagencies,andsomeofthelargestINGOs,maintaineitherinternalcashreservesorinternalemergencyfunds,whichcanadvancefundingforactivitiesuntiladonorgrantcomesonline.InEthiopia,forexample,WorldVisionInternationalreceivedaround42percentofitsfundingin2016fromprivatesources,whichitusesacrossavarietyofinstrumentsdesignedtosupportmoreefficientandtimelyresponse.WorldVisionallows20percentofitsprivatefundstobelinkedtoacrisismodifier,whichcanthenberedeployedonthedecisionofnationalleadershipwithouthavingtoseekpermissionuptheline.Inaddition,ithasaninternaldraw-downmechanismandcanputaside5percentofprivatefundseachyearasareserveforpreparednessandresponseactivities.
WFPusestheworkingcapitalitholdsatthegloballeveltoovercomethedelaysandcash-flowproblemsofbilateraldonorfundingandenableittorespond,procure,transport,andprepositionfoodandscaleupresponsesasneedsoccurratherthanwhenafundingcontractissigned.ThisadvancefundingisabigcontributortoeconomiesofscaleinthatmuchofthefoodclusterresponsedependsonWFPtosetupthelogisticscapacityforallpartners(andemergencytelecomsservicesforthewiderhumanitariancommunity).
IFRCoperatesitsownDisasterReliefEmergencyFund(DREF)toprovidequickresourcestotheitsNationalSocietiesintheeventofemergency.Similarly,UNICEFinMyanmarreceivesroughlyathirdofitsfundingfromprivatesourcesthroughitsnationalcommittees,whichcanbeinvaluableforemergencyadvancefunding.
UNHCRreceivesdonorcontributionsinthreedifferentloci:country-levelfunds,regionalfunds(e.g.,theAfricabureau),orun-earmarkedcorefunding.Thiscorefundingisrecycledthroughthe
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yearandisdirectedfromthegloballeveltowhereitisneeded.Insomecases,itisdirectedtotheprotectionandnormativeworkthatispartoftheorganization’sofficialmandatebutwhichhasbeendifficulttogetdonorstofund.UNHCRhasimprovedpredictabilityforcountryofficesthroughasystemofguaranteedminimumoperatingbudgetssothatcountry-levelresourcescanbemaintainedandcushionedfromfluctuationsindonorcontributionstospecificcrises.
Newtoolstoharnesssocialimpactinvestingarestartingtobeusedbyhumanitarianorganizationsinwaysthatboostcorefundingforemergencies.Forexample,UNICEF’sUSAchapterhasaBridgeFundthatleveragespermanentgrantstoattractprivateinvestments,andisusedasarotatinglendingtooltobridgethegapbetweenemergencyonsetandreceiptofgrantfundingforresponse.
Onanindividualagencylevelthisisthefastest,mostefficientwayoffinancingrapidresponse,butitislimitedinvolumeanddurationofleadtimeandisbeyondthescopeofmosthumanitarianactors,henceun-scalable.Becausetheseorganizationsdonotfunctiononabusinesscycleofreinvestmentandgrowth,butratheronlimitedcostrecovery,establishingthistypeofresourceisoutofreachwithoutsomesignificantinfusionofflexiblecorefundingfromeitherpublicorprivatesources.
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4. Otherissues:Multiyeartimeframesandearmarking
4.1Multiyearfunding
Thesubjectofmulti-yearfundingandhowitmayaffectefficiencyisrelevanttoallthecurrentfundingmodalities,sinceintheoryallofthemcouldbeadaptedtolongertimeframes.Bothhumanitariananddevelopmentactorshaveexpressedgrowingrecognitionthatinchroniccrisissettings,repeatedlarge-scalehumanitarianresponsestopredictabledisastersareprofoundlyinefficient.Asaresult,donorsarenowexperimentingwithextendingthehumanitarianfundingandprogrammingcyclesbeyondthestandard12-monthgrant.BothMyanmarandEthiopiaareexamplesofhow“resilience”programmingisgaininggroundincontextspreviouslylimitedtotraditionalhumanitarianprogramming.
Ethiopiahasservedasalaboratoryforresilienceprogramminginthewakeofthe2011HornofAfricafoodsecuritycrisis.Here,resilienceprogrammingfollowedthelogicofaddressingunderlyingvulnerabilitiesinordertograduatefromthecycleofcrisisandresponsetopredictableriskandmitigation.ThenewHARPfundingframework,initiatedbyDFIDinMyanmar,aimsatsimilarobjectives,intendingtogainbothtechnicalefficienciesandbroaderstrategicefficienciesforaddressingthecountry’sneeds.
Theexistenceofmultiyearfunding(oratleast“predictablefundingformultiyearprograms”—donorsarenotabletoallocatemorethanoneyear’sworthoffundinginadvance)couldhaveclearbenefitstofundingefficiencyinbothtechnicalandallocativeaspects.
4.2Earmarking
Theissueof“earmarking”contributions,thatisdonorsdirectingwhereandhowhumanitarianfundingshouldbespent(typicallyonaprojectbasis),hasbeenthesubjectofcontentionforaslongasthemodernhumanitariansystemhasexisted.NGOslargelyacceptitasthenormwhendealingwithdonorgovernments.ThoseNGOsluckyenoughtohavefullyormostlyflexible(un-earmarked)resourceshaveachievedthisbygeneratinglargeprivatesumsfromprivateandindividualdonations.UNagencies,ontheotherhand,seeearmarkingasabanetoefficiencyandstrategiceffectivenessinundertakingtheirmandates.UNagencyandICRC/IFRCrepresentativesinterviewedforthisstudywereunanimousintheirassertionthatfundingefficiencyissynonymouswithflexibility,andearmarkingistheantithesisofit.Theyalsounanimouslyexpressedconcernthatearmarkinghasgrowntighterinrecentyearswhiletheproportionoftheirfundingthatisun-earmarkedhasdeclined.
TheGrandBargainhastakenupthisissuewith“aninitialtargetfordonorstoremoveearmarksfor30percentoftheirfundsprovidedtohumanitarianagenciesby2020”(HighLevelPanelonHumanitarianFinancing,2016).ItisdifficulttoforeseehowdonorswillapproachthistargetinpracticeandwhethertheirreciprocaldemandsforgreatertransparencyfromtheagencieswillultimatelyamounttoanygreaterflexibilityornetefficienciesSomeagencyrepresentativeshaveaccuseddonorsofbeingdisingenuousonthisscore,sayingtheunderlyingproblemisreallyaboutthedonors’“distrust”oftheirimplementingpartners.
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5. Conclusionsandsuggestedguidanceforconsideringefficiencyinfundingdecisions
Thefollowingsummarizesthemaintakeawaysfromourfindingsonefficiencyinhumanitarianfunding.Thestudywasnottaskedtoproduceexplicitpolicyrecommendations,butwhereconclusionsfromthefindingslogicallysuggestpotentialactionsforimprovement,wenotethemhere.Inaddition,thissectioncontainsasetofguidingprinciplesforconsideringefficiencyalongsidetheotherfactorsindecisionmakingaroundhumanitarianfunding,andaproposalformorefarreachingstrategiccoordinationamongdonors.
5.1Areasforaction
Asshownintheprecedingpages,thedifferentfundingmodalitiespromotedifferenttypesofefficiencyaccordingtotheirobjectives.Thissupportstheargumentformaintainingadiversityofinstrumentstoemployfordifferentpurposesandthenotionoftheutilityofafinancingecosystem,asopposedtoasinglefavoredchannel.However,eachmodalityhasmuchroomforimprovement,andsomerebalancingbetweenthemwouldimproveefficiencyforhumanitarianresponseoverall.
Tobeginwithwhatneedsimproving,eachfundinginstrumentwasalsofoundtoincurcertaininefficiencies.Itisimportantheretoseparateinefficienciesthatareunavoidablebydesign—thatis,theinevitabletrade-offofonetypeofefficiencyinthepursuitofothergoals—andthosethatareduetopoorexecutionormanagementorareneedlessbureaucraticartifactsthatcanbeeliminated.
Theprimarymodesoffundingarestillinefficientforrapidresponsepurposes.
Themostefficientmechanismsformovingmoneyquicklytoenablerapidresponsearealsotheleastusedinthehumanitariansystem,asaproportionoftotalfunding.Theseare(1)pre-arrangedagreements,includingmulti-yearagreements,betweendonorsandagencypartnersatthecountryleveland(2)theemergencyreservesofoperationalorganizationsestablishedandmaintainedthroughcorefunding.
TheCERFhasaprovenmethodologyforrapidlyapprovingprojectproposalsandreleasinginitialdisbursements,butthisefficiencyishinderedbydelaysonthefrontend,whentheprocesstoprioritizefundsisprolongedanddelaysdisbursements,andontheback-endwhenagenciesareslowtocontractanddisbursetopartnersfortheactualimplementationofactivities.Asaglobalrapidresponsemechanism,themuchsmallerStartFundhasworkedbetterintermsofspeedefficiency,butislimitedinscopeofcountriesandisfocusedonsmalleremergencies—whetheritcanscaletothelevelnecessarytomeetneedsinalargecrisisisnotclear.ThespeedoftheCBPFsvaryfromonecountrytothenext,butinthesamplelookedatforthisstudy,weresimilarlydisappointingintermsofdayselapsedbetweeninitialproposalandfinaldisbursement.
Slowestofallisthetraditional(andpredominant)bilateralgrantmodality,whichinoursampletookanaverageof65daystogetfromtheproposalsubmissiontothestartofprojectactivities.Asaresult,itcanonlysupportrapidresponseiftherecipientagencyhasboththecapacitytoadvance
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fundingfortheinitialoutlaysandahighdegreeofconfidencethatthedonorwillfollowthroughonstatedintentions.
Technicalefficiencycanbeimprovedacrossallmodalitiesforbetterrapidresponsefunding:
Ø Insuddenonsetorrapidlyevolvinghumanitariancrisesfundedthroughtherapidresponsewindow,CERFproposalvettingandallocationdecisionsshouldnotwaitforaconsolidatedsubmissionofproposals.ThestrengthoftheproposalandtheadviceoftheHumanitarianCoordinatorshouldsufficetoindicateiftheproposedinterventionrepresentsanecessaryandappropriateresponsetocurrentconditions.Thiswillalsohelpworkagainsttheperverseincentivestogiveeachagencyits“fairshare.”However,thebiggesttimelinessgaincanonlycomethroughinternalagencyreformsthatpreventlongdelaysbetweendisbursementandonwardgranting.Agenciesidentifiedashavingproblemsinthisregardhavearesponsibilitytoundertakeathoroughoperationalreview(asUNICEFandUNFPAarecurrentlydoing)andenactsystemimprovementstoaddressthem.
Ø CBPFscouldimprovetheirtechnicalefficiencybymakingaggressiveeffortstomaketheprocessaslightand“userfriendly”aspossible,and/orbyhavingminimumgrantthresholdssothattheawardisworththetransactioncosts.
Ø Intheirbilateralgranting,donorsshouldincreasethe“pre-positioning”ofadvancefundswithindividualagenciesand/ormultiagencyconsortiacapableofputtingthemoneytoworkimmediatelyintheeventoftherapidonsetcrisis.Ascapacityinvestmentsinwell-placedorganizations,donorscouldconsiderincreasingboththeamountsofprepositionedadvancefundsandcorefunding.
Ø Increasingthepracticeofmulti-yearfunding,withbuilt-inmodifiersystemstoallowpartnerstoadapttochangingcircumstanceswithoutundergoingtime-consumingformalmodifications,couldsimilarlybolsterflexibilityandspeed.
Disproportionaterequirementsandinflexibilityhinderefficiencyatalllevels.
Asevidencedinthisstudyaswellasotherrecentresearch,thesmallestandshortest-durationgrantstendtohavethehighesttransactioncostsintermsoftherelativeamountofadministrativeworkrequired,andconsequentlythesmallestNGOstypicallybearthegreatestadministrativeburdenfortheleastreward.Evenlargeorganizations,whiletheyhaveacceptedandadaptedtotherequirementsoftheirdonors,saidthatformanytheburdenofreportingandcompliancewasexcessive,disproportionatetotheactualrisks(andinfactnotaneffectivemeansofreducingfiduciaryrisk),andhadnegativeimpactsontheirabilitytocarryouttherealbusinessofhumanitarianresponse.
Inordinatelyhightransactioncostsonsmall-sizedgrantsisinefficientfordonorandgranteesalike,asostensiblyeveryadditionalpieceofreportingorextraworkneededforcontractmodificationrequiredoftheagencyinturnmustbeprocessedbythedonor.Thepreliminaryproposalsforharmonizedreportingareastepintherightdirection,butamorerationalapproachwillalsorequiredonors(includingbothdonorgovernmentsandagenciesthataresub-grantingtoimplementingpartners)toreevaluatetheirgrantingproceduresalongthefollowinglines:
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Ø Reportingrequirements,bothprogressandfinancial,shouldbemadecommensuratewithtimelinesandoverallsizeofgrants,ratherthanbeingappliedthroughaone-size-fits-alltemplate.Inaddition,onceanorganizationhasbeenthroughinitialcompetencyvetting,itshouldnotbemadetofacesimilarhurdlesinsubsequentprojectcontracts(orindifferentlocations).
Ø Proceduresregardingmodificationstoprojectsshouldbeestablishedwithaneyetoallowingmaximumflexibilitywhilemaintainingappropriateaccountabilitycontrols.Thiscouldincludebroaderbudgetcategoriesandexplicitpermissiontomovebetweenlineswithoutrequiringamidstreammodificationifitdoesnotsubstantiallyalteranyoftheprojectobjectives.
Theaddedvalueoftheintermediaryroleinmulti-linkgrantsisinconsistentandoftencreatesnetinefficiencies.
Insomecases,economiesofscalecanbecreatedthroughmulti-linkgrants,andaneffectiveintermediarycanaddvalueintermsoftechnicalassistanceandcoordination.Inothercases,however,theallocativeefficienciesgainedbyintermediariescanbeeasilyoutstrippedbytechnicalinefficienciessuchasdelaysrelatedtoonwardcontracting.Toguardagainstthis,anagency’spotentialeffectivenessinthisroleandforagivensetofcircumstancesshouldthereforebedemonstratedandnotassumed:
Ø Abusinesscaseforvalueaddedbyanintermediaryagencyshouldberequiredintheirproposals,whichanswersnotonlythequestionofwhyfundingthroughanintermediaryisnecessaryorpreferabletodirectfundingofimplementersintheparticularsituation,butalsohowthisagency,asopposedtoanother,isbestsituatedtoplaytheintermediaryrole.Partofthecaseforpotentialvalueaddedbytheprospectiveintermediaryagencymustincludeprovenefficiencyinfunding,contracting,andflexiblemanagementofgrants.
Allocativeefficiencyandthestatedgoalsoflocalizationareimpededbyriskperceptionandcapacityconstraintsonthepartofdonorgovernments.
Currentlocalizationeffortsappeartoaimatincreasingend-chainfundingtolocalactors,notmeaningfullyincreasingtheirdirectaccesstointernationalresources.Theoverwhelmingmajorityofhumanitariancontributionsgoesthroughbilateralgovernmentgrants,whichrarelyaccruedirectlytolocalorganizations.Therefore,forlocalizationgoalstobemet,oneoftwothingsneedstohappen:(1)Donorgovernmentsfindwaystobegingrantingdirectlytolocalactorsfarmorethantheycurrentlydo(whichinmostcasesisnotatall)or(2)thecountry-basedpooledfundsincreaseinsizetoallowforastepupinthenumbersandsizesofgrantsprovidedtolocalactors.
Donorgovernments,foravarietyofdomesticpoliticalandregulatoryreasons,havenotbeenwillingtodirectlyfundlocalactors,asitrepresentstoogreataperceivedrisk.Signsthatthismaybechangingcanbefound,buttheyarevanishinglyfewandfarbetween.Inaddition,somemajordonorssimplydonothavethecapacityonthegroundtomanagemorethanasmallnumberofgrants,meaningtheymustdisbursemoneyinallotmentstoolargeforasmallorganizationto
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absorbandputtouse.Inthemeantime,whileinsomecasesfundingalocalorganizationdirectlymightbemoreefficient,itwillnotbedone.Inotherwords,caseswillremainwheretheprincipleofsubsidiaritycannotberealizedandwheretheinefficienciesofmulti-linkfundingchainsareunavoidable:
Ø Totheextentpossible,donors(includingdonorsofpooledfunds)shouldconsidersubsidiarityindeterminingatwhatleveltomakegrants.Unlesstheallocativeefficienciesandaddedvalueofhavinganintermediarycanbedemonstrated,directfundingshouldbepreferred.
Ø Targetedcapacityinvestmentsinlocalorganizations(corefundinggrants)canbolsterandenhancetherangeofoptionsavailablefordonorsseekingtomaximizeefficiencyaswellaseffectiveness.
Ø CBPFs,wheretheyarefunctioningwellandallocatingdirectlytolocalNGOs,shouldbeconsideredasatoolforpromotingsubsidiarityefficiencybydonorsthatremainunabletofundtheseorganizationsdirectly.Iftheirrapidresponseperformanceandadministrativeprocedurescancontinuetoimprove,theCBPFsmayultimatelybethekeytoreconcilingthetensionbetweendonors’supportforlocalizationontheonehandandtheinefficiency(andperceivedrisk)ofprovidingnumeroussmallgrantstolocalentitiesontheother.
5.2Guidingprinciplesfordonordecision-makingregardingefficiency
Toreiterate,whenmakinghumanitarianfundingdecisions,theefficiencycriterionisclearlysupersededbyotherconsiderations,aboveallbeinghowthefundingwillbestenableaneffectiveresponsetopeople’sneeds.Butdonorsmustbecognizantthatefficiencyfactorsintoeffectiveness,andthatcumulativeinefficienciescandetractfromdesiredoutcomes.
Whendecidinghowtoallocatetheirannualenvelopes,donorsneedtoemploydifferentmodalitiestoachieveareasonablebalanceofpredictabilityandresponsiveness,andallocativeefficiencybothatthecountryandgloballevels,whileretainingcontingencyfundingatthegloballevelincaseofunforeseenneeds.Ontopofthat,theyneedtomanagetheirownpolicycommitments,accountabilityrequirements,andcapacityconstraints.Eachinstrumenthasamixofcomparativeadvantagesthatrespondtoelementsofthesedifferentpriorities.Currently,donorsadmitthatknowingiftheyhavethebalancerightisverydifficult.TheissueismorecomplexthantheGrandBargaincommitmentswouldappeartosuggest,becauseeachdecisionentailsopportunitycosts.Forexample,dedicatinglargeamountstomulti-yearfundingagreementsprovidesincreasedpredictabilitybutreducedflexibilityifcircumstanceschange.
Maintainthewidestpossiblerangeofoptionsandtoolstoemployfordifferentneeds.
Donorsshouldseektoexpandtheirrangeofoptionsbeyondoneortwoinstrumentsforfunding,knowthatdifferentsituationswillbemoreamendabletodifferentinstrumentsorcombinationsofinstruments.Ablanketrejectionofpooledfunding(orconversely,aninabilitytomakedirectgrantstoimplementers),forexample,reducesthescopeforeffectivenessindonorship.
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Tothisend,donorsshouldundergoaninternaloftheircapacitytosupportefficientfinancing.Thiscouldbeassimpleasaquestionnairecontainingthefollowing:
• Whatproportionofourfundingisspentinprotractedcrises?
• Howoftendowemodifyandextendgrants?
• Areweabletoworkflexiblyacrosshumanitariananddevelopmentfundingstreams?
• Howwellsetuparetheytorespondtorapidresponse?
• Dowehaveagoodrangeofglobalandnationalresponsivemechanisms(Includingsupporttointernalfundingfacilitiesandinstruments)?
• Whatadditionalevidencedoweneedfromgranteestoimprovefuturedecision-making?
Theanswerstotheabovemayprovideausefulsteerfordonorsseekingtomaximizetheefficiencyandeffectivenessoftheircontributions.Forexample,ifalargepercentagegoestoprotractedconflictswhereno-costextensionsarecontinuallyrequired,thismaybeanefficiencyargumentforashifttomoremulti-yearfunding.
Startingfromthespecificsofthecontextandhumanitarianneeds,matchgoalswiththefundinginstrumentsbestsuitedtoefficientlyservicethem.
Iftheneedisforrapidresponse(asmaybepredictableincountrieswithfluidconflictconditionsorfrequentsudden-onsetemergencies),applyingforbilateralgrantswillbelessefficientthanworkingthroughpre-arrangedframeworkagreementsorapplyingforpooledfundsthathaveprovenspeedydisbursementtimes.
Large-scale,chronicemergenciescausingsimilarneedsamonglargesegmentsofthepopulationcouldbemoreefficientlyfundedthroughlargeumbrellagrantstocompetentcoordinatingagenciesthataddtechnicalvalueandprovideeconomiesofscalewithlogisticalandprocurementinfrastructures.
Specificgapsandunderfundedneedscanbeaddressedwitheitherflexiblebilateralgrantingorearliercontributionstopooledfundwindowsdesignedforthatpurpose,orboth.
Smallpocketsofneedandhighlylocation-specificneedsinindividualareaswilloftenbemoreefficientlyfundedbyeliminatingtheintermediaryandfundinglocallybasedorganizationsdirectly.
Finally,manycountrycontextswillatdifferenttimesorsimultaneouslyexperienceallfourofthescenariosdescribedabove.Thebalanceofdifferentfundingneedsandobjectivesshouldbereflectedwithinorbetweendonorportfoliostotheextentpossible.
Determineandconsiderotherdonors’plansasfactorsinefficiencydecisions.
Finally,becauseinmostmajorhumanitariancrises,nodonorcansinglehandedlyprovidethefullcomplementofresourcesneededtomeetneeds,ideallyfundingdecisionswillbemadeinconcert
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withotherdonors.Attheleast,theywillnotbemadeinisolation.Donorchoicebetweenfundingmechanismsshouldbeusedtohelpbalancetheneedsofbothtechnicalandallocativeefficiencyinlightofwhatcounterpartsaredoing,withinthelargerpictureofstrategicpriorities.
Strategiccoordinationoffundingdecisionsbetweendonorsissomethingthatgoesontovaryingdegrees,butinanadhocandinconsistentway.Buildingthisstepintoaframeworkforefficiencycalculationcouldpotentiallybringaboutmorerobustcoordinationandrigorousdecisionmaking,creatingavirtuouscircle.
5.3Enhancingefficiencythroughamorecoordinated,evidence-basedapproach
Theaboveareasforactionpre-supposethecurrentlevelofdonorcoordination.Whatfollowsisaproposalforconsiderationofadditionalcommontoolsthatwouldhelpstrengthenamorestrategicallycoordinatedapproachtofundingdecisions.
Agreeonacommonsetofmetricsforassessingefficiency
Donorsrequirebetterevidenceonwhichtomakedecisionsaboutwhoandhowtheyfund.Efficiencywouldonlybeoneconsiderationinthesedecisions,butanimportantone.Todothatwouldrequiregreatertransparency(opendata)onbudgetsandtransactiontimesofthedifferentchannels,includingumbrellagranteesaswellaspooledfundmechanisms.
ThemembersoftheGoodHumanitarianDonorshipinitiativeshouldthereforeconsidercommissioninganeutralentity,e.g.anauditingbody,todevelopanefficiencyframeworkwithexplicitstandardsthatcouldcomparetheefficienciesandvalueaddedofdifferenttypesofpooledfundsandpotentialintermediaries.Thiswouldhavethebenefitofincentivizingallactorstoimprovetheareasofweaknessthatarecurrentlycausingunnecessaryinefficienciesand,intheprocess,wouldfacilitatethefulfillmentoftheGrandBargaincommitments.
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Annex1:Listofpeopleinterviewed
GlobalHelen Alderson DirectorofFinancialResourcesandLogistics ICRC
Marc Cohen SeniorResearcher Oxfam/CfC
Paul Currion IndependentConsultant Independent
Andrea DeDomenico Chief,FundingCoordinationSection(FCS) OCHA
Lisa Doughten Chief,CERFSecretariat OCHA
Jessica Eliasson HumanitarianPolicySpecialist Sida
Michael Jensen Chiefofsection OCHACERFSecretariat
Chris Kaye DirectorofGovernmentPartnerships WFP
Christopher Lockyear DirectorofOperations ACF
Jemilah Mahmood UnderSecretaryGeneral,Partnerships IFRC
David Matern HeadofDonorRelationsandReportsUnit UNICEF
Michael Mosselmans HeadofHumanitarianprogrammepractice,policyandadvocacy
ChristianAid
James Munn Director NRC
Lamade Nicolas SeniorManager,Security,RecoveryandPeace GIZ
Melissa Pitotti HeadofPolicy ICVA
Mark Pryce HPCInformationServicesUnit OCHAFTS
Sanjana Quazi SeniorAdviser UNICEF
Deepti Sastri HeadofEvidence StartNetwork
Rachel Scott TeamLeader:Conflict,FragilityandResilience OECD/DAC
Dhananjayan Sriskandarajah SecretaryGeneral CIVICUS/HLP
Julian Srodecki TechnicalDirectorforHumanitarianGrants WorldVision
Anne Street HeadofHumanitarianPolicy CAFOD/CfC
Hans vanderHoogen HumanitarianAdvisor MinistryofForeignAffairs,TheNetherlands
James Weatherill CoordinationandResponseDivision(CRD) OCHA
Hesham Youssef AssistantSecretary-GeneralforHumanitarianAffairs
OrganisationofIslamicCooperation(OIC)
Ethiopia
YoucefAitChellouche HeadofDelegation IFRCEthiopia
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John Aylieff
WFP
Kati CsabaMinister-CounsellorandSeniorDirector(Development),Ethiopia GovernmentofCanada
Anna Ekman DonorRelations UNICEF
Aurelie Ferial DeputyRegionalOperationsDirector ACF
Daniel Holmberg SeniorHumanitarianAdvisor OFDA
Abera Lulessa DirectorofFinance EthiopianRedCross
Tim Mander EthiopiaHumanitarianFundManager OCHA
Richard Markowski DeputyCountryDirector CRSEthiopia
Charlie Mason CountryDirectorSavetheChildrenEthiopia
Phinias Muziva ProgrammeManager NRCEthiopia
James Reynolds HeadofDelegation ICRC
Esther Salazar CountryDirector MercyCorpsEthiopia
Hanspeter Schwaar HeadofDevelopmentCooperation BMZ
Marijana Simic CountryDirector IRCEthiopia
Alex Whitney CountryDirector WorldVisionEthiopiaIraq
Andrew Barash SeniorInter-AgencyCoordinationAdvisor UNHCR
Alex Beattie HumanitarianAffairsOfficer(CHASEOT) DFID
Mike Bonke CountryDirector Welthungerhilfe
Julie Davidson
NRC
Lotti Douglas Director IraqCashConsortium
Ivo Freijsen HeadofOffice OCHA
Sally Haydock CountryDirector WFP
Nicholas Hutchings TechnicalAssistantEuropeanCommission
Jason Kajer ActingCountryDirector IRC
DanielMunoz-Rojas HeadofSub-Delegation-Erbil ICRC
PeggittyPollard-Davey ReportsSpecialist UNICEF
Michael Prendergast AssociateExternalRelationsandReportingOfficer,UNHCR
Olga Prorovskaya IraqHumanitarianFund OCHAAndresGonzalez Rodriguez CountryDirectorIraq Oxfam
Aneta Sama CountryDirector ACF-Iraq
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Diana Tonea
NRC
Basil Yousif FoodSecurityProgrammeManager RNVDOMyanmar
Suresh Bartlett NationalDirector WorldVisionMyanmar
Kim Bawi ExecutiveCommitteeMember MyanmarRedCrossSociety
Edward Benson Shelter/NFI/CCCMClusterCoordinator UNHCR
Sophie Ford HumanitarianProgrammeAdvise OxfaminMyanmar
Brian Heidel RegionalAdvisorforEastAsiaandthePacific USAID/OFDA
Michael Hemling HeadofFinanceandAdministration WFP
Chris Hyslop DeputyHeadofOffice OCHA
Gwenolenn LeCouster SeniorProgramOfficer UNHCR
Laura Marshall HeadofProgram NRC
Leslie McCracken SeniorHumanitarianAssistanceAdvisor USAID
Esther Perry FirstSecretary AustralianEmbassy
Narciso Rosa-BerlangaSeniorHAO OCHA
Dom ScalpelliWFPResidentRepresentativeandCountryDirector WFP
Gum Shah
Metta
Masae Shimimura EmergencyPreparednessandResponseOfficer WFP
Mark Silverman Delegate ICRC
Kelland Stevenson CountryDirector PlanInternational
Jane Strachan EmergencySpecialist UNICEF
Moe Thu AssociateDirector-HEA WorldVisionMyanmar
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Annex2:Quantitativeanalysisdetails
An independent-samples t-test was conducted to compare admin burden for bilateral grants and pooled fund grants. There was a significant difference in the scores across the pooled funds (M=4.42, SD=0.36) and bilateral grant (M=2.26, SD=0.13) conditions, t(14.2)=-5.64 p=0.00. These results suggest that the processing of pooled funds poses a greater administrative burden to organizations than the processing of bilateral grants. An independent-samples t-test was used to compare time lags (days between proposal and award) for bilateral grants and pooled funds grants. Once again, there was a statistically significant difference between the scores for pooled funds (M=27.25, SD=6.80) and bilateral grants (M=46.53, SD=8.14), t(46.6)=1.82 p=0.08. Comparing time delays between awards and disbursement, we once again note significant differences between the scores for pooled funds (M=32.42, SD=3.48) and bilateral grants (M=18.3, SD=1.88), t(18.1)=-3.56 p=0.002. However, in this case, pooled funds appear to be slower.