Value for Money Series
Safeguard Every Dollar: towards a framework linking goodwill and the value for money
By Asaad Taha, Ph.D., MSP®, PRINCE2®
Generous donors respond repeatedly to local and international pleas for support following human-made and natural catastrophes. They finance unresolved issues — relieving poverty, saving lives, reducing child and maternal mortality among the marginalized and disenfranchised. They also grant monies to social and economic crises, especially interests aligned with a cause, political, social impact actors, and Faith-Based Organizations (FBOs).
The individuals and taxpayers — providing the resources for government, charities, foundations, grantors, Non-governmental Organizations (NGOs), community-based organizations (CBOs) and other support agencies — contribute from the highest personal motives and interests. Considering the dollars donated they have a right to a return on their investment in goodwill.
In this series, I hope to explore, share, and start a conversation on the nature and dimension of the problem in delivering donor dollars as intended. This means examining the complex situation presented by world humanitarian needs. Within that context, I hope to show the need for a paradigm shift to a new strategic approach to develop trust in the alignment and delivery of donor and taxpayer intent. The resultant enabling and empowering framework integrates Systems & Design Thinking, Delivery Systems, Results-Based Management, Monitoring & Evaluations, and Agile disciplines to develop beneficiary’s self-reliance, build their resilience, and prevent protracted aid dependence.
Believing prosperity for all optimizes the wellbeing of all, the Value for Money (VfM) depends on the ability to safeguard every dollar.
Part One of Five
Millions give millions every year to humanitarian assistance. There is no shortage of goodwill and higher motives as shown in Figure 1. “In 2018, total international humanitarian assistance from governments and EU institutions and estimated contributions from private donors reached US$28.9 billion. This represents a rise of just 1% from 2017. Over the past five years, total international humanitarian assistance has grown by 30%, driven equally by public and private donors” (Key trends in global humanitarian assistance, 2019).
Figure 1: International humanitarian assistance increases by 1% in 2018, but by 30% since 2014
Attributed to (Key trends in global humanitarian assistance, 2019)
Note: The EU is the European Union.
The volume of multi-year humanitarian funding provided by governments has grown steadily since 2016, “rising from close to US$1 billion to US$2.9 billion in 2018, when it accounted for 17% of all humanitarian assistance from governments” (Key trends in global humanitarian assistance, 2019). Figure 2 illustrates “The proportion of total funding UN agencies and international NGOs [Non-governmental Organizations] reportedly received as multi-year contributions grew from 1.1% in 2016 to 5.4% in 2018” (Key trends in global humanitarian assistance, 2019).
Figure 2: Multi-year contributions from governments increase to 17% of funding in 2018
Attributed to (Key trends in global humanitarian assistance, 2019)
- NGOs (Non-governmental Organizations)
- Pooled Funds (Country-Based Pooled Funds (CBPF) allow donors to pool contributions into unearmarked funds to support local humanitarian efforts, enabling humanitarian partners in crisis-affected countries.)
- RCRC (Red Cross/Red Crescent)
- INGOs (International Non-governmental Organizations)
Yet, few of these well-intended dollars reach local and national respondents. (See Figure 3.) This is the quandary and challenge in ensuring grantors and grantees optimize their respective value for money goals. The receipt of only 3.1% in 2018 by those on the front lines of need from the government multi-year contributions signals the drain of the donated dollar in their way through delivery pipelines to the front trenches.
Figure 3: Direct funding to local and national responders reported to UN OCHA’s Fitness Tracking Service*, 2018.
*Office for the Coordination of Humanitarian Affairs Financial Services Tracking
The cost of calculation
While costs of delivering vary by donor, region, context, country, and program, you should consider the components in the calculation. The Review of the Administrative Cost Regime and Its Core Unity Funding Budget (DECISION 75/69), 2018 offers these terms:
- “Direct costs are readily and directly attributed to, and recovered, either wholly or in part, from an operation, programme [sic] or project financed from extra budgetary contributions.” They may include “substantive and operational staffing, facilities, equipment and activities, and programme [sic] services (i.e., planning, resource mobilization, monitoring, evaluation and management). They may also include direct costs pertaining to the administration of human, financial, physical and information technology resources (e.g., service costs). All direct costs should be financed by the relevant operation, programme [sic] or project.”
- “Indirect costs cannot be traced unequivocally to specific activities, projects or programmes [sic],” such as “ the central administration of human, financial, physical and information technology resources; staffing, facilities, equipment, activities and legal liabilities; the implementation of UN-wide initiatives …; and oversight (the Office of Internal Oversight Services and the Board of Auditors).” Indirect costs may also include “indirect (or overarching) costs pertaining to central programme [sic] services (planning, resource mobilization, monitoring, evaluation and management). Indirect costs are appropriately, and cost-effectively, recovered through the support costs charge expressed as a percentage of direct costs.”
A hypothetical calculation is demonstrated here in Figure 4 where a delivery chain might include donor, INGO/UN Agency, NNGO (Nigerian Non-governmental Organization, and CBO (Community-based Organization). You might calculate the Program Support Cost as follows:
Figure 4: Calculation solving for the amount left net of indirect cost
All rights reserved © S4F.Solutons™, 2018
Donated Dollar — [(a+b) /c] (d) = x
a = Lowest Indirect Cost
b = Highest Indirect Cost
(a+b) /c = Average Indirect Cost as %
d = number of social actors
x = amount left net of charging the indirect cost
EXAMPLE: 100 USD cents — [(5.90+12.54) /2] (4) = 36.88 USD cents total indirect cost by 3 social impact actors delivery chain plus donor
∴ 63.12 cents of every tax/donated dollar remain for the direct cost
However, there is no universal agreement on what might be considered “legitimate” direct or indirect costs. There is also no standard formula for calculating the cost of social actor administration. Interestingly, the lack of standardization has created a healthy competition between social impact actors and given a competitive edge to small and agile organizations.
Contrary to known management practices, large multilateral organizations have failed in using their functional structures to realize more efficiency from the standardization of processes and economies of scale. Moreover, changing multilateral organization administration costs are a bureaucratic process crossing across global politics. Fulfilling the building sense of urgency − for change, development of review committee terms of reference, selection of committee members and reaching consensus − could take three years or more.
An examination of Table 1 presented by UNEP (United Nations Environment Programme) shows the rates of administrative costs, calculated as a ratio of project funding approvals by triennium, have generally hovered below 13 percent (Report on the Review of the Administrative Cost Regime and Its Core Unity Funding Budget (DECISION 75/69), 2017).
The percentages may look reasonable, but the ratios for not include “indirect cost.” Most organizations charge many activities as “direct cost” which may range from stationary to project team member family’s benefits.
During my time at the DFID (United Kingdom Department for International Development), we benefitted from the social actors’ competition and factored in grants award decision-making. It has been part of the DFID’s VfM measures.
Change may come soon because the Executive Committee of the Multilateral Fund for the Implementation of the Montreal Protocol decided to review the administrative cost regime for the 2018–2020 triennium at its meetings, specifically the 67th (decision 67/15) and 73rd (decision 73/62(c). A proposed approach to cost recovery should include harmonization of the cost-recovery methodology, the cost classifications, and the cost-recovery rate.
The cost of donor fatigue
The multiple direct and indirect costs are associated nowadays with donors’ fatigue due to protracted crises and emerging ones. For example, the total requirements expected of UN-coordinated appeals reached US$25.2 billion in 2017 including appeals reflecting protracted crises in Syria, Yemen, Somalia, Nigeria, Ethiopia, and Pakistan. Despite the appeals and record-breaking funding, appeals exceeded funding “resulting in only 59.2% of total requirements being met” as displayed below in Figure 5 (Global Humanitarian Assistance Report, 2018).
Figure 5: How did assistance compare with requirements set out in appeals?
Image attributed to (Global Humanitarian Assistance Report, 2018)
It is also true the billions dedicated to ODA (Official Development Assistance) serve purposes other than humanitarian assistance including peacekeeping and infrastructure. Such funds reflect geopolitical interests, short and long-term debt, banking, and environmental concerns. Figure 2 shows a substantial increase in overall ODA and a 2.4% increase in direct humanitarian assistance to mark a 2% increase in the proportion of humanitarian assistance to ODA.
Nonetheless, as illustrated in Figure 6, fully 87.3% of the funds are deployed in ways other than humanitarian assistance.
Figure 6: Humanitarian assistance as a proportion of ODA to the 20 largest recipients of international humanitarian assistance, 2007–2016
Image attributed to (Global Humanitarian Assistance Report, 2018)
Note: ODA is the Organisation for Economic Co-operation and Development (OECD)’s Official Development Aid.
Deloitte financial forensics experts write, “Humanitarian aid is distributed in some of the world’s most challenging environments, and the process of providing aid — from collecting funds through to the disbursement of money, goods, or services — can be rife with fraud, waste, abuse, corruption, and even money laundering and terrorist financing. Further, donors want accountability and will often ask after an instance of fraud or corruption whether their funds were used for nefarious purposes, and if so, why they were not better safeguarded” (Fancher, Verma, Josefsson, & Demming, 2018).
Conservative think tank AEI (American Enterprise Institute) warns, “Stricter enforcement of US counterterrorism regulations — though needed — clearly won’t solve all of the humanitarian sector’s current challenges, which include manipulation, fraud, and sexual abuse, in addition to terrorist diversion. But throwing more money at NGOs won’t address these problems either” (Dearden, 2019).
Less biased reports note, “Corruption in humanitarian work is among the worst kind. It can mean the difference between life and death. It robs people of essential resources, destroying dignity and causing desperation” (Humanitarian Assistance, 2019). The large amounts of money deployed by many diverse sources through fluctuating currencies under crisis situations beg for interference. Their delivery is prone to individual and group theft, corruption, and misdirection. Moreover, distribution has defied banking systems and fed terrorist agendas.
Compounding this is the vulnerability of the donor organization structures. Each layer, agency, committee, agency, and subcontractor in Figure 7 increase risk to funds and VfM in the best situations.
Figure 7: Typical schematic structure, global/thematic funds
Image attribute to Anti-Corruption Resource Centre
· INGOs are not established by inter-governmental agreements. The United Nations Economic and Social Council (ECOSOC) provided INGOs are organizations accepting members designated by government authorities and providing “such membership does not interfere with the free expression of views of the organizations”
· CSOs are “play a vital role in enabling people to claim their rights, in promoting rights‐based approaches, in shaping development policies and partnerships, and in overseeing their implementation” (The Organisation for Economic Co-operation and Development’s (OECD) Development Assistance Committee (DAC).
Indeed, current practice is not fit for purpose, fit to use, fit to context, and/or fit in time. Also, it is not about the high administrative cost or fraud. The fact is current delivery systems — also known as classic programs or project methodologies − do not deliver value for money. The adopted delivery methodologies lack the design-required elasticity for such fluid situations and complex systems dynamics. Experienced across the failed functions of humanitarian assistance, I look to correct the assistance systems’ dysfunctionality by adapting delivery systems capable of addressing real-time issues.
To meet this humanitarian, socio-economic, and existential situation, we need an overarching framework that adapts promising practices from a broad spectrum of best practices including high-reliability organization (HRO), business sectors, software development domains, and agile tribes in creating Social Impact Paradigm 4.0.
The originating donors and taxpayers need a secure process to protect their contributions from fraud, embezzlement, graft, and more. But they also want a stewardship system to map and match the expectations of both grantors and grantees. Because these expectations have failed to actualize at either end of the process, I have designed practical frameworks, assessments, and more to safeguard every donor dollar and still realize the providers’ intent and the beneficiaries’ needs.
I have opened this conversation inviting comment and collaboration as I continue to develop the S4F Solutions™ framework as an issue-driven, evidence-based, and fit to purpose architecture, a VfM guarantee serving the disenfranchised and marginalized with a fit, flexible, and fluid framework.
Part Two of this series will explore why donors, taxpayers, and other granters contribute and what recipients expect. Unless we understand their respective VfM, we have no metric for success, failure, or resolution.
Author’s Bio: Asaad Taha, Ph.D. is a social entrepreneur and thought leader with multisectoral expertise across the continuum of delivery from the strategic level to frontline field experience. Asaad has a rich professional background in UN agencies, UK DFID, U.S. Department of State and USAID, The Global Fund to Fight AIDS, Tuberculosis and Malaria, International Non-Governmental Organizations, Non-Governmental Organizations, and Community-based Organizations, and more. He is Co-founder and Principal Adviser at S4F.Solutions™.
1.Combine systems, design, and agile thinking, strategies, and methodologies
2. achieve transformational change, high-reliability procedures, teams-of-teams’ practices, artificial intelligence, cyber-physical systems, the Internet of Things, and the Internet of Systems
3. maximize connectedness, awareness, big-data sense making, and access to transformational information across partners, people, products, and processes.
We foresee the integration of emerging powers in managing increasing data volume, extraordinary connectivity, unprecedented analytics, astonishing human machine interface, augmented reality options, and more. Social Impact Paradigm 4.0™ will enable and empower a real-time interconnectivity between providers, intermediaries, and beneficiaries of social impact programs. To accomplish this, we must create systems and practices to interface communicate, analyze, and learn from their own operation in the physical world of social impact need.
Dearden, J. (2019, June 15). It’s time to take foreign aid theft seriously. Retrieved from American Enterprise Institute: http://www.aei.org/publication/its-time-to-take-foreign-aid-theft-seriously/
Fancher, D., Verma, S., Josefsson, V., & Demming, A. (2018, Aug. 14). Protecting Humanitarian Aid From Risk. Retrieved from The Wall Street Journal: https://deloitte.wsj.com/riskandcompliance/2018/08/14/protecting-humanitarian-aid-from-risk/
(2018). Global Humanitarian Assistance Report. Washington, DC: Development Initiatives. Retrieved from http://devinit.org/wp-content/uploads/2018/06/GHA-Report-2018.pdf
Humanitarian Assistance. (2019). Retrieved from Transparency International: https://www.transparency.org/topic/detail/humanitarian_assistance
(2019). Key trends in global humanitarian assistance. Washington, DC: development initiatives. Retrieved from http://devinit.org/wp-content/uploads/2019/06/Briefing_Key-trends-in-global-humanitarian-assistance-2019.pdf
(2017). Report on the Review of the Administrative Cost Regime and Its Core Unity Funding Budget (DECISION 75/69). United Nations, UNEP: United Nations Environmental Programme. Executive Committee of the Multilateral Fund for the Implementation of the Montreal Protocol.