EfficiencyandInefficiencyinHumanitarianFinancingDecember2017AbbyStoddard,LydiaPoole,GlynTaylorandBarnabyWillitts-KingwithShoaibJillaniandAlanPotter
ii
ThisstudyismadepossiblebythegeneroussupportoftheAmericanpeoplethroughtheUnitedStatesAgencyforInternationalDevelopment(USAID).ThecontentsaretheresponsibilityofHumanitarianOutcomesanddonotnecessarilyreflecttheviewsofUSAIDortheUnitedStatesGovernment.
iii
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
iv
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.
v
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
1
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.
2
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
3
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.
4
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.
5
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
6
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.
7
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:
8
• 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.
9
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
10
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.
11
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
12
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).
13
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%
14
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-
15
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.
16
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
17
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.
18
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
19
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
20
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)
21
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
22
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
23
(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
24
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
25
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
26
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.
27
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.
28
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
29
yearandisdirectedfromthegloballeveltowhereitisneeded.Insomecases,itisdirectedtotheprotectionandnormativeworkthatispartoftheorganization’sofficialmandatebutwhichhasbeendifficulttogetdonorstofund.UNHCRhasimprovedpredictabilityforcountryofficesthroughasystemofguaranteedminimumoperatingbudgetssothatcountry-levelresourcescanbemaintainedandcushionedfromfluctuationsindonorcontributionstospecificcrises.
Newtoolstoharnesssocialimpactinvestingarestartingtobeusedbyhumanitarianorganizationsinwaysthatboostcorefundingforemergencies.Forexample,UNICEF’sUSAchapterhasaBridgeFundthatleveragespermanentgrantstoattractprivateinvestments,andisusedasarotatinglendingtooltobridgethegapbetweenemergencyonsetandreceiptofgrantfundingforresponse.
Onanindividualagencylevelthisisthefastest,mostefficientwayoffinancingrapidresponse,butitislimitedinvolumeanddurationofleadtimeandisbeyondthescopeofmosthumanitarianactors,henceun-scalable.Becausetheseorganizationsdonotfunctiononabusinesscycleofreinvestmentandgrowth,butratheronlimitedcostrecovery,establishingthistypeofresourceisoutofreachwithoutsomesignificantinfusionofflexiblecorefundingfromeitherpublicorprivatesources.
30
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.
31
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
32
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:
33
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
34
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.
35
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
36
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.
37
References
Bailey,S.,&Harvey,P.(2017)."TimeforChange:HarnessingthePotentialofHumanitarianCash
Transfers."ODI.Bayat-Renoux,F.,&Glemarec,Y.(2014)."FinancingRecoveryforResilience."UNDP.Beck,T.(2006)."EvaluatingHumanitarianActionUsingtheDACCriteria."London:ALNAP.Bruned,J.M.(2016)."TheGrandBargain:ASharedCommitmenttoBetterServePeopleinNeed."
IASC.Buchanan-Smith,M.,Cosgrave,J.,&Warner,A.(2016)."EvaluatingHumanitarianActionGuide."
London:ALNAP.Caccavale,J.,Haver,K.,&Stoddard,A.(2016)."DonorReportingRequirementsResearch."
HumanitarianOutcomes.CERF.(2014)."AnalysisofDatafrom2013RC/HCReports—ValueAdded."UnitedNationsOfficefor
theCoordinationofHumanitarianAffairs.CERF.(2016)(a)."BriefingNoteonCERFandtheGrandBargain."UnitedNationsOfficeforthe
CoordinationofHumanitarianAffairs.CERF.(2016)(b)."PartnershipsinHumanitarianAction."UnitedNationsOfficefortheCoordination
ofHumanitarianAffairs.CERF.(n.d.)."AnalysisofLessonsLearnedfrom2013RC/HCReportsontheUseofCERFFunds."
UnitedNationsOfficefortheCoordinationofHumanitarianAffairs.Cheung,S.N.(1987)."EconomicOrganizationandTransactionCosts."InTheNewPalgrave:A
DictionaryofEconomics,v.2editedbyJohnEatwell,MurrayMilgate,andPeterNewman,(pp.55–58).London,NewYork,Tokyo:MacmillanStocktonPressMaruzen.
AhmedandCordell.(2015)."AComparisonReviewofUNProjectPartnershipAgreementsfromNGOImplementationofHumanitarianProjects."InternationalCouncilofVoluntaryAgencies.
DeBettignies,J.-E.,&Ross,T.W.(2004)."TheEconomicsofPublic-PrivatePartnerships."CanadianPublicPolicy30(2).
DGECHO.(2013)."CashandVouchers:IncreasingEfficiencyandEffectivenessacrossAllSectors."EuropeanCommission.
ECHO.(n.d.)."Howmuchfundingreachesthebeneficiary?MethodologyOutline."ICAI.(2017)."TheEffectsofDFID’sCashTransferProgrammesonPovertyandVulnerability."
IndependentCommissionforAidImpact.(2015)."IndependentFinancialReviewoftheUNAgenciesResponsetoProtractedCrises."OCHA.(2017)."EthiopiaLessonsLearnedfromtheElNinoDrought,2015–16.OCHASTAITMission
RetreatOutcomes."UnitedNationsOfficefortheCoordinationofHumanitarianAffairs.OECD.(2012)."TowardsBetterHumanitarianDonorship:12LessonsfromDACPeerReviews."
OrganisationforEconomicCo-operationandDevelopment.Palenberg,M.A.(2011)."ToolsandMethodsforEvaluatingtheEfficiencyofDevelopment
Interventions."Berlin:BMZEvaluationDivision,GermanFederalMinistryforEconomicCooperationandDevelopment.
Pallage,S.,Robe,M.A.,&Bérubé,C.(2006)."OnthePotentialofForeignAidasInsurance."IMFStaffPapers53(3),453–475.
PandemicFinancingStakeholdersMeetingWorldBankGroup.(2015).PandemicEmergencyFinancingFacility.
PaulinaOdame,D.S.(2015)."UnderstandingHumanitarianNeedFromaFinancingPerspective:TheDriversofCost."OCHA.
Poole,L.(n.d.)."Financingfor21stCenturyRisk."
38
Roselli,C.,Fabbri,P.,&CollingwoodEsland,P.(2016)."LessPaperMoreAid."ICVA.Schenkenberg,E.(2016)."TheChallengesofLocalisedHumanitarianAidinArmedConflict."MSF.Stoddard,A.(2017)."InternationalHumanitarianFinancing:ReviewandComparativeAssessment
ofInstruments,UpdatedEdition."HumanitarianOutcomes.Stoddard,A.,&Willitts-King,B.(2014)."Activity-BasedCostingforHumanitarianAppeals."IASC
HumanitarianProgrammeCycleSteeringGroup.Sutton,K.,Wynn-Pope,P.,&Holden,C.(2012)."HumanitarianFinancinginAustralia:Scoping
ReportonComparativeMechanisms."HumanitarianPartnershipAgreement.Thomas,M.(2017)."PooledFunds:MappingandIdentifyingLessons."UNHCR.(2016)."UNHCR’sUseofUnearmarkedFundingin2015."OfficeoftheUnitedNationsHigh
CommissionerforRefugees.UNHLPHF.(2016)."TooImportanttoFail:AddressingtheHumanitarianFinancingGap."High
LevelPanelonHumanitarianFinancing.UNDP.(2016)."TheRoleofUNPooledFinancingMechanismstoDeliverthe2030Sustainable
DevelopmentAgenda."UnitedNationsDevelopmentGroup.UNOCHA,FundingCoordinationSection.(2016)."Country-BasedPooledFunds:ANimbleFunding
MechanismtoBoostFrontlineResponse."NewYork:UnitedNationsOfficefortheCoordinationofHumanitarianAffairs.
WFP.(2014)."EarmarkingofDirectedMultilateralContributionstoWFPin2013."WorldFoodProgramme
Willitts-King,B.(2015)."StudyontheAddedValueofaReformedCentralEmergencyResponseFund."UNOfficefortheCoordinationofHumanitarianAffairs.
Yussuf,M.,Larrabure,J.L.,&Terzi,C.(2007).VoluntaryContributionsinUnitedNationsSystemOrganisations:ImpactonProgrammeDeliveryandResourceMobilizationStrategies."Geneva.
39
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
40
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
41
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
42
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.