Money Matters: The differing fortunes of INGOs in the US and UK

There is a lot of money floating around in the world of global development. Billions of dollars in fact. And much of it is going to NGOs. We take a look at the top INGOs in both the United States and United Kingdom to see where they get their money and how their fortunes had fared over the past five years. We found two quite different stories. A tale of two sectors My colleague Miguel Antonio Tamonan did a deep dive into the numbers and they revealed an intriguing insight: the 50 largest NGOs in the U.S. had a revenue of more than $23 billion a year between them, and the majority of these entities have actually seen their incomes grow fast over the last half-decade. This makes the U.S. NGO sector, as a bloc, as financially powerful as some of the world’s largest donors, and the growth of the U.S. economy means their influence is likely to continue to increase. Miguel also found that while we tend to talk a lot about USAID and government funding, the biggest driver of income in these organizations is the American public. Because of the way NGO incomes are recorded, it’s maddeningly difficult to work out exactly how much NGOs got from the public and how much from foundations, but it looks like donations and bequests from individuals exceed government grant funding by a long way as the largest source of NGO funding. Switching over to the U.K., Miguel did a similar analysis. The story over there is almost the reverse. Hit hard by budget cuts from the government, British NGOs saw a nearly 10% decline in their incomes over the same period. How devastating were the government aid cuts? Miguel found that funding was actually growing prior to the COVID-19 pandemic. In 2020, government funding to NGOs grew to £790 million from £704.2 million in 2018. But since budget cuts came into effect in late 2020, cash going to these organizations plummeted to £574.6 million in 2021 — a 27.3% plunge. It wasn’t all gloom. Revenues for 14 organizations saw a jump, thanks to funding for humanitarian projects in Ukraine and public sponsorships. It’s a fascinating look at how some of these global players get their money. And it also raises the question: With all this money going to organizations based in the global north, how do we increase our commitment to localization? Read: The 50 largest US INGOs — and where they get their money (Pro) Also read: The falling income of the UK's largest development charities (Pro) Come join us! Devex Pro is our dedicated news service for leaders in global development. If you’re a consultant, a chief of party, a senior leader at an NGO, a for-profit implementer, or a bilateral, multilateral, or philanthropic funder, this service is designed for you, to keep you up to date with the latest developments. We’ve picked out five key themes which our existing Pro members have told us they want to particularly focus on — climate, funding, leadership, localization, and the rapid growth of AI — and we’ve dedicated a day to really get a thorough understanding of each issue, with in-depth analyses and focused events. For Money Matters readers, I’d particularly recommend two events. One, happening tomorrow, will explore how we can provide more effective funding. This will include an examination of the growing trend for trust-based philanthropy. And the other, on Friday, will talk about how some NGOs in the global north have succeeded in not just talking about localization but making practical changes to make their work more locally focused. Sign up now and take advantage of a $100 annual membership discount on these essential news services. Funding activity We publish tenders, grants, and other funding announcements on our Funding Platform. Here are some of the ones which have been viewed the most in the past 10 days. ADB has agreed to provide a $200 million loan to improve water supply and sanitation systems and support the enhancement of urban resilience and heritage structures in India. AfDB has approved a $7.8 million grant to increase renewable energy generation across Africa UNICEF is seeking consultancy services to review the impact of its WASH programs in Nigeria over the last five years. USAID is offering the chance to become a climate finance partner, which will allow organizations to receive funding from its Climate Finance Accelerator. The World Bank is inviting firms to register to provide services in the reconstruction of Ukraine. + Try out Devex Pro Funding today with a free five-day trial, and explore funding opportunities from over 850 sources in addition to our analysis and news content. Reforms not enough Over the last year, the calls for reforms of the international financial architecture have grown into a crescendo. But experts who have looked into the issue say reforms alone won’t unlock the money needed to tackle existential threats, such as climate change and extreme poverty. In a report commissioned by the Indian presidency of the Group of 20 leading economies, obtained by my colleagues Vince Chadwick and Shabtai Gold, nine experts, co-led by former U.S. Treasury Secretary Lawrence Summers and the Institute of Economic Growth President NK Singh, said reforming the multilateral development banks will not be enough. Wealthy shareholders of these institutions need to put more money into the system. “Today, MDBs only mobilise 0.6 dollars in private capital for each dollar they lend on their own account,” the G20 authors write. “They should aim to at least double this target.” Read: G20 experts urge 'inescapable' capital increase for development banks (Pro) Also read: EBRD president ‘confident’ US Congress will back big capital increase (Pro) Transition pains Open Society Foundations, one of the world’s most well-known philanthropic organizations, is going through a change of leadership; George Soros has given way to his son Alexander Soros. Since taking over the foundation, the younger Soros has announced deep staff cuts of as much as 40%. He has also said that he is “more political” than his father and wants to become more engaged with domestic U.S. politics. My colleague Stephanie Beasley reports that the cuts will be in addition to the 20% staff reduction Devex reported in April. OSF operates in more than 120 countries around the world. Within the past two years, the organization has shuttered several offices and national foundations in an effort to streamline and reduce its operating costs, Stephanie writes. The shift “will create a culture of ‘strategic opportunism’ at the Foundations and among grantees they support,” according to a statement co-signed by Alex Soros and Mark Malloch-Brown, the OSF president. “This proposed new model will favor both longer-term ‘patient capital’ approaches as well as tactical short-term needs,” they said. Read: Open Society Foundations deepens staff cuts with latest 40% reduction Background: Open Society Foundations readies for next phase of reorganization (Pro) Numbers don’t lie As I explained earlier, U.K. aid cuts are hitting British-based nonprofits pretty hard. One such NGO feeling this pinch is CARE International UK, which after delaying the publication of its financials for months, has revealed that it is facing an existential crisis. The charity was excluded from our analysis of U.K. NGOs because it was so late in filing accounts. But it is highly dependent on government funding, David Ainsworth writes. In the fiscal years 2020 and 2021, 71% of its income came from the government, making it particularly vulnerable to recent aid cuts, which seem to have taken it somewhat by surprise. CARE, which has gone through a major restructuring in order to save cash, has said it faces “material uncertainty” over whether it is a “going concern.” These technical terms mean we can’t be sure if it has enough money to keep operating for the next 12 months, and they were probably inserted after a lengthy wrangle between CARE’s auditors and the finance director. A spokesperson tried to downplay the crisis at the charity. “These statements have had no bearing on CARE International UK’s ability to carry out its work,” they said. The spokesperson is possibly being a bit optimistic, but the statement in the accounts does represent very much a worst-case scenario, David tells me. CARE probably does have enough cash, although it’s notoriously more difficult for an organization to raise money once it makes these difficulties public, so there can be a snowball effect. And CARE has an extremely low level of free reserves — money in the bank it can use as it chooses. So it is very vulnerable to sudden shocks. This is a development that we will keep watching, so stay tuned. Read: Major UK NGO faces 'uncertainty' over future after FCDO cuts Also read: UK aid under fire for focus on self-interest over tackling poverty I wrote this week’s Money Matters while listening to Davido’s “Unavailable” featuring Musa Keys. 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