The end of aid’s flexible friend

6 Feb 17

As UK aid becomes focused on outcomes, a scheme that allows recipients to use funding as they see fit is being ended to ensure money is not misused. Could it also stifle innovation?


The press has not been kind to UK aid in recent weeks. Throughout December, for instance, the Daily Mail launched a festive tirade of articles attacking the “outrageous” ways taxpayers’ money was being “squandered” overseas.

It lambasted projects in Pakistan, Yemen and Ethiopia, to name a few. Girl Effect’s creation of a five-piece girl group Yegna – dubbed the “Ethiopian Spice Girls” by newspapers – led to the NGO’s funding being summarily pulled as soon as the government returned from its Christmas break.

The death knell for another Department for International Development initiative also rang out at the end of last year, but received far less attention.  That was despite it driving significant improvements across the aid sector, while supporting groundbreaking reconciliation work, technological innovations and all manner of development projects.

Programme partnership arrangements (PPAs) have served as DFID’s main funding vehicle for its civil society partners since 2000. They came to an end in December 2016, with plenty of warning from the department. But, amid unprecedented aid needs, growing public scepticism and uncertainty triggered by events like Brexit, the impending loss of PPAs sparked concerns around a “slow-onset funding disaster” for NGOs.

For at least one UK-based organisation, that proved accurate. International development charity Progressio was forced to close its doors in September last year, after 75 years in operation.

“Unfortunately, the funding landscape has become increasingly competitive and we have been unable to replace the £2m unrestricted [PPA] grant from DFID,” its chair, Martin McEnery, wrote at the time.

McEnery highlights a key feature of PPAs that set them apart from the four funding vehicles DFID will now take forward. PPAs were “unrestricted” funding: they were not tied to specific, donor-selected projects, and gave NGOs significant flexibility around how they used the money.

This allowed them to shift resources to where they were most needed and would have the greatest impact. It helped test risky and unproven projects, where results were uncertain, and leverage funds from other donors. It gave NGOs the ability to invest in themselves – their own systems, processes and policies – to improve the quality of their overall work. While all donors recognise this as important, very few will back it financially.

As Petra Storstein, head of the institutional partnership section at the Norwegian Refugee Council (NRC), explains: “Donors put different demands on us. We have to deliver on transparency, gender- related issues, value for money – it’s a long list. But they very rarely allocate resources to ensure we can respond to these demands.”

The NRC signed its PPA with DFID in 2011, worth £14.6m and lasting until last December. The funds made up only a small part of its annual budget – 1-2% – but Storstein says they were critical and “extremely strategic”.

NGOs without a high public profile or links to churches, trade unions or other organisations, like the NRC, don’t collect as much money from the general public – another key source of unrestricted cash. While only a small part of the NRC’s budget overall, the PPA made up a hefty chunk of its flexible funding.

The PPA helped the NRC to set up an internal innovation fund, which could be used to test out new approaches and tools. A global lead on learning was hired, who ensured this was captured and shared across the whole organisation. The NGO was able to improve its service that gathers and maps data on displacement – today an authoritative resource used by the entire humanitarian community.

“These are initiatives that are very challenging to fund,” says Storstein, adding they would not have been possible without the PPA. Now, she says, it will be much more difficult for the NRC to innovate, learn and have the strategic conversations it had in the past.

It’s a similar story from organisations across the sector, says Sarah Mistry, director of effectiveness and learning at Bond, a membership body for UK NGOs. She describes PPAs as a “rare and prized commodity” that, in the best cases, enabled NGOs to “transform and really push the boat out on building up organisational capacity”.

“I do think the loss of any flexible funding is detrimental.  There is a risk to quality and the ability to innovate, and I am worried about that,” Mistry agrees.

Nevertheless, she says, DFID should not have continued with PPAs, although they were “good for those who had them”. To some, they were also seen as exclusive. “I think it is helpful that DFID has gone down a more inclusive route for subsequent funding,” Mistry notes.

Indeed, DFID says it chose to end PPAs to move away from unrestricted funding for the largest civil society organisations towards a broader, more open and competitive funding model focused on outcomes, results and the department’s priorities.

From now on, DFID will have four main vehicles for its partnerships with civil society. These will: match donations from the general public; support global volunteering programmes; fund innovative collaborations between civil society organisations, think-tanks and the public and private sectors; and provide a pot of funds for small and medium- sized civil society organisations.

However, PPAs were already open to smaller civil society bodies. Within the 41 organisations that secured them in the latest round of funding were not only numerous household names but also a number of smaller, less well- known NGOs.

Take MapAction, for instance, an NGO with just three full-time staff members. It signed an £869,155 PPA with DFID in 2011 for its work generating geo-mapped data for aid agencies to use in humanitarian emergencies.

Conciliation Resources is another example. It signed its PPA as a small organisation, and the funding helped it to double in size. Now, however, it’s cutting back and not replacing staff  who have moved on until it is more certain about its funding. The PPA made up 20% of its annual budget.

Sadiya Shaikh, head of partnership and development at Conciliation Resources, explains that the PPA was critical in the NGO’s “professionalisation” as it grew and had to meet higher standards. It was also a platform for risk taking, she tells PF, allowing the organisation to trial untested tools and methods, and fund projects that were the first of their kind.

One PPA-funded pilot project marked the first and only cross-border trade initiative in Kashmir – the Indian state at the centre of territorial tensions with Pakistan. Without any precedent, it is tricky to get donor buy-in for these kinds of activities, Shaikh notes. Unlike people who run private businesses, donors don’t allow much room for failure.

Not that any of Conciliation Resources’ projects funded with the PPA did fail – all grew, in fact. Flexible funding enabled “adaptive programming”, Shaikh explains, allowing Conciliation Resources to navigate around glitches or obstacles hit along the way.

In contrast, she says DFID’s new funding opportunities are “very, very specific and prescriptive”, with “convoluted” application criteria. She believes smaller or medium-sized organisations like Conciliation Resources – which DFID hopes to appeal to with its new funding model – will be “disproportionately impacted” by the loss of PPAs.

Some of the PPA’s transformative aspects – a high appetite for risk and the potential for innovation and adaptive approaches – could be built into some of the new mechanisms, says Mistry, although there are plenty of unknowns still to be cleared up. One thing is certain, however: none will offer flexible funding.

DFID says the new instruments are consolidated, simplified and will allow a broad range of organisations to undertake a wide range of activities. It stresses that the focus on results will be much clearer to ensure UK aid is not taken for granted. Under the leadership of secretary of state Priti Patel – who has in the past called for DFID to be abolished – the department has taken a much stricter line on scrutiny and value for money.

And DFID is not the only one taking this “rather cautious approach”, says Mistry: “All governments are anxious about this stuff ”. Shaikh agrees there is a “global shift” towards “projectised funding” – earmarked for specific initiatives only.

It’s certainly true that donors favour earmarked funding. The latest OECD data shows that, since 2008, it has accounted for around 80% of all contributions to civil society from donor countries and EU institutions. Comparable OECD data does not go back any further but, of the $6.88bn in aid growth to civil society in the eight years to 2015, flexible funding made up just 13.3%.

For Shaikh, it represents an “increasing view of civil society purely as implementers of government projects or agendas”. She continues: “Obviously, we feel our value is much broader than that: a lot of innovation comes from civil society. We present ideas and positive critical challenges.”

Mistry agrees that civil society organisations are “endlessly inventive” and adds that creativity should be employed to move away from dependence on DFID.

“There is potential to get involved with impact investments, loans and crowdfunding. Philanthropy is opening up in a really interesting way. So there are a lot of other potential sources [for flexible funding] and we are essentially advising our members to diversify.”

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