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DAKAR, 6 November 2013 (IRIN) - In 2010, prominent UK-based international NGOs joined forces to manage an emergency rapid response fund (ERF), which aimed to provide quicker, more cost-effective, impartial aid directly to local NGOs. The results of this effort were irrefutably positive. But since then, donors have been slow to commit further funding. Given this, can the Start Fund herald a new NGO funding model?

The 2010 fund worked like this: the UK Department for International Development (DFID) gave the 15-member Consortium of British Humanitarian Agencies (CBHA) US$12.9 million over two years. Tasked with improving the effectiveness and quality of humanitarian response - especially to neglected emergencies - CBHA managed a rapid response fund, put more staff into surge positions, and trained local and international NGO staff in core humanitarian competencies.

Rules were put in place. Funding proposals were due within 24 hours of the declaration of a fast-onset crisis; money had to be in the bank within 72 hours; and work on the ground had to start within seven days. The CBHA board - largely made up of emergency directors - decided where to allocate funds, with each organization given equal voting regardless of agency size or reach. This structure promoted responses based on needs on the ground rather than organizational interests, said Sean Lowrie, director of the fund, which has recently been re-named the Start Fund. "There's an element of sacrifice involved. Agencies invest in what will make the most difference rather than just going for their own funding," he told IRIN.

The fund aims to overturn what Lowrie calls a "Victorian business model" whereby funding terms are more or less set by governments yet civil society organizations do 70 percent of the work on the ground. This model "prevents us from evolving with the changing times... So we are offering improved performance and lives saved in exchange for a different sort of control. In our analysis, bureaucracy is a main challenge in creating a humanitarian system that is fit for the 21st century," said Lowrie.

The Start Network's vision is to move the fund beyond British NGOs and to set up global hubs.

The results

Over three years, the CBHA's ERF was used to intervene in 12 emergencies of all kinds: fast and slow onset, large, small, national and regional. In three emergencies - in Bangladesh, Myanmar and South Kordofan - there were no UN or NGO funding appeals.

According to independent evaluations, disbursements and start-up times were two to three times faster on average than other pooled funds or bilateral grants. The disparity was particularly stark in slow-onset crises, where it took on average 72 hours to allocate money, versus the average of 80 days it took for bilateral grants to get to NGOs.

The CBHA fund's light structure allowed it to respond early to some under-funded crises, said Lowrie. For instance, it released 40 percent of its 2011 annual budget to respond to the Horn of Africa drought several months before the disaster hit headlines in July 2011, when major international appeals were launched. "There is a gap in the [funding] architecture for small-scale events, off-the-radar crises. We're positioning around that," said Lowrie.

One way the Start Fund stands out is the access that it gives to local NGOs, which are routinely sidelined from accessing international finances: 54 percent of the CBHA funding went directly to local NGOs' humanitarian response programmes.

Between its members, the CBHA, now re-branded the Start Network, can programme through 6,800 partner NGOs and civil society-based organizations in 200 countries, said Lowrie.

A 2012 independent evaluation found the fund was "so successful that it could well serve as a model for an NGO equivalent to the UN's CERF [UN's Central Emergency Response Fund]".

Still, DFID discontinued its funding for the CBHA ERF in March 2012. This was due to a shift in DFID's approach to funding NGOs, instituted by Justine Greening, the new secretary of state for international development, rather than because of any fault in the fund's performance, said independent evaluators.

Since then, Irish Aid has been keeping the fund going, covering its core costs.

Other pooled funds

Pooled funds grew from $583 in 2006 to $900 million in 2011, according to humanitarian funding expert, Lydia Poole. This growth was spurred by the limited capacity of donors to manage individual projects and the recognition that closer coordination was needed both among donors and implementing agencies.

NGOs can directly access a number of pooled funds, including country-level emergency response funds - 67 percent of this funding goes to NGOs - and common humanitarian funds, 57 percent of which goes to NGOs, according to Lisa Doughten, head of the UN Central Emergency Response Fund.

NGOs cannot directly access the CERF, which was set up in 2006, and channels an average of $450 million to rapid-onset and under-funded emergencies annually. Nonetheless, 20 percent of CERF funds go to NGOs each year through UN agencies.

A 2010 independent evaluation that examined the fund from 2006 to 2010 found the CERF had improved the predictability of funding in under-funded emergencies, enhanced coordination of some responses, and successfully channelled money to chronically under-funded sectors such as transportation, though it worked less well in terms of getting money to NGOs quickly on the ground, said the evaluation.

Since then, things have sped up, said Doughten. Research conducted through Resident and Humanitarian Coordinators in 2012 determined it took on average 48 days for NGOs to receive CERF funding, and 40 days to receive rapid response allocations, she said, adding that project implementation usually starts much earlier because partners know the funds are on their way: half of NGO projects start within 12 working days.

According to the Start network's website, directly giving the money to NGOs makes the fund more efficient and means less money would be spent on transaction costs from agency to agency. Network members said it is too early to say whether this would be the case. All pooled funds have legal frameworks outlining what percentage of the fund should go to programme support, fund management and other activities. The CERF's programme support costs, for instance, are 10 percent, 3 percent of which goes to the UN Secretariat and 7 percent to cost recovery; Start's overheads for fund management, internal cost recovery for implementing agencies, and learning and evaluation reach 17 percent.

Setting up a viable fund that adheres to donors' strict benchmarks and transparency and accountability checks does not come cheap, said Doughten. "If you have to set up formal structures, it comes at a cost." She continued: "DFID is CERF's largest donor . We're at the receiving end of lots of questions about benchmarks and indicators that we have to develop and achieve. This fund will also have to think about these issues of performance and accountability."

Start Fund support

Donors IRIN spoke to were supportive of the Start Fund.

European Commission Humanitarian Aid Department (ECHO) adviser Simon Holder told IRIN: "We are enthusiastic about the [Start Fund] concept as a new intuitive way of injecting funds to NGOs. This is something that is developing for NGOs that [is] filling a gap in the market. The CERF is strongly UN led. The [CERF] concept was to speed up process and delivery, but the NGO community remains at the forefront of disaster response."

CERF's Doughten is also supportive. "NGOs are a critical part of any humanitarian response," she told IRIN, "so any initiative that helps them get assistance would be welcome," noting the CERF has been advising the Start Fund based on its own experiences as a pooled fund.

But she added, "It must complement existing pooled funding systems. Global humanitarian funding is limited, so we have to do more with less."

No significant funds have yet come forward. Holder told IRIN, "We [ECHO] are not going to fund it this year. Our budget is very tight given the priorities in the Sahel, Horn of Africa and Syria." He noted ECHO already had rapid response funding mechanisms in place.

DFID could not be reached for an interview. The Start Fund team is currently discussing options with DFID, Irish Aid and other donors, as well as "scattering 1,000 seeds" in search of alternative funding, including social impact bonds, hedge funds, insurance companies and private foundations, said Lowrie.

Mathew Carter, CBHA chair and emergency director at the NGO Catholic Agency For Overseas Development (CAFOD), said getting donors to say yes was a "chicken and egg" situation - each was waiting for another to commit first.

Some speculate that donor hesitation is linked to fear of ceding control over the frontline of how the money is spent. Many donors prefer to channel through UN agencies because it is simpler - they only have to write one check. "It's more complicated with NGOs because we're all very different," said Carter. "We are fundamentally all of us - Oxfam, CAFOD, the Red Cross - born out of civil society, and that brings our strengths and also challenges in different ways. That's where all our strength comes from and or ability to deliver on the ground," he said.

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This story was published by IRIN on 6 November 2013.