DfID explains future of NGO funding

By Molly Anders 08 November 2016

A staff member of the U.K. Department for International Development supervises the unloading of humanitarian aid from a RAF C-17 aircraft in Kathmandu, Nepal on April 29, 2015. Photo by: Sgt. Neil Bryden / RAF / CC BY

Aid practitioners are cautiously raising concerns about the civil society partnership review, released by the U.K. Department for International Development on Friday after more than a year delay. The review, which lays out parameters for the more than 1.2 billion pounds ($1.5 billion) of aid spent annually through NGOs, streamlines grants into four main channels and introduces a new funding stream, U.K. Aid Connect.

The 16-page document which took 18 months to complete has left many nongovernmental organizations with more questions than answers about how they can seek funding from DfID.

Despite new opportunities for small and medium-sized NGOs, as well as a few priority sectors, aid groups told Devex the new plans could leave them short on funds for months or longer while they adapt. U.K. Aid Connect hasn’t been fully explained and it’s unclear what scale of resources it will offer.

A previous system of program partnership arrangements, which provided unrestricted funding to nonprofits, will end in December. When it does, more than 40 organizations will face a combined 360 million pound gap in strategic and core funding, according to DfID’s website on PPA grants. PPAs were designed to support nonprofit organizations that were unable to front implementation costs, unlike many of their commercial competitors.

NGOs in the U.K. had eagerly awaited the CSPR as a way to find out where PPA funding will be redirected. “DfID has been strongly signaling to NGOs that the days of strategic funding through the PPAs were over, most recently at the International Development Committee hearing in September,” Essi Lindstedt, a strategy and change specialist working with NGOs told Devex.

“We expected a move to funding tied more closely to DfID’s own priorities. But we still hoped that NGOs would have the ability to propose outcomes, so that DfID could draw on all the strengths of the sector,” Lindstedt said.

DfID has no intention of replacing PPAs, a spokesperson told Devex, but is working with civil society organizations to finish the design for U.K. Aid Connect, a new funding mechanism that opens for bidding in March 2017.

“We are engaging with CSOs in finalizing the U.K. Aid Connect design to ensure we maximize the potential impact from this new approach,” the spokesperson said.

Two funding streams — U.K. Aid Direct and U.K. Aid Match — encourage bids from CSOs in three sectors: family planning, nutrition and ending modern slavery, unusually specific focus areas compared with the broader themes of ending poverty; fragile and conflict states; women and girls and economic development outlined in the new U.K. Aid Strategy.

A simpler funding package

DfID has streamlined its funding mechanisms into four main pots. DfID stresses throughout the review the importance of value for money, but makes no mention of imposing its payment by results scheme more widely.

The closest reference appears early in the document, when it’s announced that “DfID will revise its approach to reimbursing overhead costs. This will balance recognition of the costs incurred by CSOs with the continued need to incentivise efficiency and deliver maximum value for money. “

U.K. Aid Direct remains the main channel for funding of small and medium-sized NGOs with annual income less than 10 million pounds. The program offers two categories of grants, one for less than 250,000 pounds and one for between 250,000 and 4 million pounds. The latter type marks an increase from the previous cap of 2 million pounds, and this round will provide up to 40 million pounds ($49.5 million) in grant funding.

U.K. Aid Match provides matching funds to donations raised by CSOs from the public and is open to organizations of all sizes. This pot has also increased, and in this round DfID will match up to 30 million pounds ($37 million) in raised funds.

U.K. Aid Volunteers funds development work implemented by volunteers, including the International Citizen Service, a government-run volunteering program for 18-25 year olds, as well as organizations including VSO International. According to the review, this funding channel will fulfill the Conservative Manifesto commitment to “triple the number of young people taking part” in ICS.

Finally, U.K. Aid Connect is a new funding stream for CSOs and is designed to support coalitions of think tanks, public, private and nonprofit organizations “to help find solutions to current complex situations whilst tackling tomorrow’s challenges,” according to the review. Little else is known about how the fund will operate, except that it will open for proposals in March 2017.

So far, there is no limit on the size of organizations eligible to apply, offering some hope to larger organizations that don’t qualify for U.K. Aid Direct and currently receive PPA funding.

A second DfID spokesperson told Devex in a phone interview that the department had made it clear that PPAs would end, and the new strategy outlined in the CSPR is “meant to provide clarity” of what DfID CSO engagement “will look like in its place.”

The spokesperson also said the goal of the new CSPR is to “make it easier for CSOs to access funding,” and that the review is “also trying to reach a broader network range of CSOs,” the spokesperson said.

Hopes, concerns for UK Aid Connect

As a forum for cross-sector collaboration and funding, U.K. Aid Connect could prove an innovative way to draw partners together. Such funding streams are relatively novel for bilateral donors and could facilitate the U.K.’s new commitment to deliver 30 percent of its official development assistance through government departments other than DfID.

For example, the fund could help players across sectors learn how to partner for international development. Some U.K. government departments such as the Foreign and Commonwealth Office and Ministry of Defence have a poor track record in aid delivery. Likewise, many corporations and diaspora groups have little to no experience working in international development.

“Given that other department beside DfiD are spending aid money, it wouldn’t be surprising to try and get some cross-government benefits,” said Sarah Mistry, director of effectiveness and learning at NGO network Bond.

One individual working for a domestic anti-slavery advocacy organization said that in advance of U.K. Aid Connect’s launch, DfID is working to build ties among institutions and create more incentives for collaboration.

“We were told we could access DfID funding if we could partner with an international [development] organization working on the same issue,” said the source, who spoke to Devex on condition of anonymity to preserve business ties. “It’s very new, but we are trying to figure out how that would work,” the person said.

Still, many aid groups wonder if U.K. Aid Connect can fill the gap left behind by flexible funding.

“With the ending of the PPAs there’s a real danger there will be a loss of quality, loss of learning, loss of the things that people are able to spend that more flexible funding on that really led to better quality programming,” Mistry told Devex in a phone interview.

“It remains to be seen what U.K. Aid Connect is going to be like, because it’s really important that DfID has some funding somewhere for risk-taking, for innovation, something that’s flexible and adaptive if it’s going to be tackling complex problems with multi-faceted solutions from a range of players,” she said.

One particular concern for many larger PPA recipients is timing. Flexible funding will run dry in December, three months before U.K. Aid Connect opens for bids. Other funding streams aren’t an option for larger organizations including Oxfam, Save the Children, Islamic Relief, ActionAid and others with annual income over 10 million pounds per year and don’t qualify to apply for U.K. Aid Direct.

“If you’re a large organization there’s nothing for you in here. OK, U.K. Aid Match, potentially yes, but U.K. Aid Direct is not for you, and U.K. Aid Connect has a big gap before the first money’s available,” Mistry said.

It’s possible the gap allows DfID time to consult with further on U.K. Aid Connect’s structure, while impacting only those organizations large enough to have reserves to hold them over.

Nutrition, family planning and ending modern slavery

Aid practitioners were surprised at the specificity of the three focus areas of the CSPR but unsurprised at their political connotations. Both Prime Minister Theresa May and DfID head Priti Patel have mentioned ending modern slavery in multiple public addresses, though May only in domestic contexts.

The DfID spokesperson said one of the reasons for the delay of the CSPR, which was originally due out in October 2015, was that Patel “wanted to put her mark on this, it’s definitely got her input, and she met with a lot of NGOs about it before it was released.”

The spokesperson said Patel also took a special interest in the CSPR’s “recognition of CSOs especially in fragile and conflict regions finding it very difficult to operate” she said.

Despite Patel’s interest in fragile states, Lindstedt believes the CSPR offered too little to those organizations working in difficult contexts, especially given “DfID’s previous commitments to deliver at least 50 percent of its programs in fragile states,” she said.

U.K. Aid Match incentivizes work in countries ranked in the bottom 50 of the Human Development Index, she pointed out, but the instruments don’t seem to go far enough acknowledging the delivery problems faced by many NGOs working in fragile states, opting instead for nutrition and family planning interventions.

“They are important, but what makes them the issues where civil society has the greatest leverage, rather than say national government or the low-cost private sector?” Lindstedt said.

“The technical solutions for issues like family planning, or management of acute malnutrition are fairly well rehearsed and there is a strong clinical evidence base,” Lindstedt said. “The evidence base we need urgently to build is how to deliver services in fragile or conflict affected states, or in ‘last mile’ contexts where it has been hardest to finish the job of the [Millennium Development Goals].”

Although practitioners eagerly await more details about U.K. Aid Connect, DfID has pledged in the CSPR to create more opportunities for CSOs to interact with DfID, including open days and “roadshows,” beginning with a CSO event on Nov. 22 at DfID headquarters.

Aid groups also await the long-anticipated Bilateral Aid Review and Multilateral Aid Review, which will clarify the CSO picture, namely the 50 percent of bilateral CSO funding that is dispersed by DfID’s 28 country offices.

For more U.K. news, views and analysis visit the Future of DfID series page, follow @devex on Twitter and tweet using the hashtag #FutureofDfID.

About the author

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Molly Andersmollyanders_dev

Molly is a global development reporter for Devex. Based in London, she covers U.K. foreign aid and trends in international development. She draws on her experience covering aid legislation and the USAID implementer community in Washington, D.C., as well as her time as a Fulbright Fellow and development practitioner in the Middle East to develop stories with insider analysis.


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