House of Commons - International Development

Select Committee on International Development Seventh Report

5 Reform of the humanitarian sector: financing

85. The financing of the international humanitarian system is the second issue which has been identified as key to improving its performance. DFID told us that "Globally, the financing of humanitarian work is highly fragmented and volatile, and there is weak coordination between donors, and between them and the operational agencies."[126] There are three issues of concern in relation to funding:

the total level of funding available;
the equity of the distribution of funds between humanitarian emergencies; and,
the speed with which funds are disbursed in the event of an emergency.

The idea of expanding the CERF to improve the speed and equity (between emergencies) of funding to UN agencies was one of the two proposals from the HRR which Jan Egeland prioritised for implementation (together with the cluster approach discussed in Chapter 4). Other proposals have focused on the manner in which donors and UN agencies disburse funds, and the provision of funding to NGOs. In this chapter we examine the problems which have been identified in relation to financing, and the proposals which have been made to address them.

Total funding

86. As mentioned earlier[127] the volume of international humanitarian assistance has been rising over time. Rather than increasing steadily, the increases have tended to occur step-wise in response to specific high-profile emergencies, a phenomenon which Judith Randel of Development Initiatives described to us as a "ratchet effect". She suggested that increases in humanitarian assistance had been the result of: globalisation, which had created a 'global village' in which people saw physically distant individuals as 'neighbours'; the arrival of new bilateral donors; and, increasing media attention to humanitarian disasters. She cautioned against the blind assumption that recent increases in humanitarian assistance, which had been ratcheted up by humanitarian crises in Iraq, Afghanistan, the Indian Ocean and Pakistan, would be sustained in the long term.[128]

87. While OECD-DAC countries provide the large majority of official humanitarian assistance, the donor group is very diverse. Many non-OECD countries have a long history of international humanitarian engagement[129] — including Saudi Arabia, South Korea, and Eastern European states. Jan Egeland told us that attracting new donors was a key priority for UN-OCHA.[130] We were encouraged to hear that several new bilateral actors had responded to the disasters during 2005, including several Gulf States.[131]

88. Despite the principled neutrality of humanitarian actors, the provision of humanitarian funding can clearly have political implications. For example, numerous commentators have suggested that the generosity of US assistance to the humanitarian response to the tsunami in Indonesia was an effort to improve the country's reputation in the state with the world's largest Muslim population.[132] We believe that the international humanitarian sector needs to be recognised for the important role it can play in uniting people behind common humanitarian principles, particularly given the religious and political tensions which have been heightened by the international 'war on terror'. The wider and more diverse the international humanitarian landscape, the more likely that different individuals and communities will find points of identity rather than divergence. We support DFID's ongoing work to help potential donors find ways of contributing to the international humanitarian efforts.

89. A core principle of humanitarianism is the allocation of funds according to the extent of humanitarian need. Despite the increasing volume of international humanitarian aid, it was argued to us that "the global funding pot is too small"[133] and the total pot of humanitarian funding for any given emergency is usually inadequate to meet the needs identified by humanitarian actors.[134] The Indian Ocean Tsunami Disaster was extremely unusual in attracting more funds than were required for humanitarian actors to carry out the projects they proposed to meet the needs they had identified. Despite this apparent surplus of funds we heard claims of unmet needs on the ground and assertions that much was wasted in administration rather than delivery. The evidence we received showed that the humanitarian effects of natural disasters are increasing, and that in most humanitarian disasters, the funding available to humanitarian actors to tackle the unmet needs they identify is inadequate. Consequently, we were disappointed that the Secretary of State could not give us an assurance that the proportion of DFID's spending accounted for by humanitarian assistance would increase in line with the Department's overall budget.[135] Instead he told us that the extent of DFID's humanitarian assistance would be determined by the extent of humanitarian need identified. As unmet humanitarian needs already exist, and overall humanitarian need is increasing, we recommend that the Secretary of State make a commitment to increase the proportion of DFID's spending accounted for by humanitarian assistance in line with the Department's overall budget. This would demonstrate the importance that DFID affords to its provision of humanitarian assistance and set a valuable example to other donors, particularly others who made commitments during 2005 to increase their ODA.

90. A further issue, which relates to all forms of humanitarian fundraising, is the extent to which donors fulfil the pledges they make.[136] The United Nations reports, for example, that donors actually paid out less than half the amounts they promised following Hurricane Mitch which killed 10,000 people in Central America in 1998.[137] Monitoring of the extent to which pledges are fulfilled has been hampered by a lack of transparency and consistency in the reporting of humanitarian assistance, although recently DAC donors have taken some steps to improve this. Global Humanitarian Assistance reports that the DAC has been working with OCHA to improve systems for tracking expenditure in tsunami-affected countries. The Reuters AlertNet website has maintained a 'Tsunami Aid-watch' which currently reports that $6.86 billion of the $7.34 billion pledged in response to the tsunami has been allocated.[138] At a country level, Afghanistan has established a database for monitoring aid flows, the Donor Assistance Database.[139] According to Global Humanitarian Assistance: "Combining country level and international monitoring should help to track the humanitarian dollar more accurately from the point when a donor makes a commitment to the point where expenditure is made on the ground."[140] We applaud all efforts to make the reporting of global humanitarian assistance more accurate and transparent, and think that the most effective means of ensuring donors fulfil their pledges is to publicise such data as widely as possible.

Equity

91. Highlighting the problem of inequity in the international response to different humanitarian disasters has been a preoccupation of the current ERC, Jan Egeland.[141] The disparities can be demonstrated most starkly through financial data. Figures from the Global Humanitarian Assistance (GHA) project show that contributions to the Indian Ocean Tsunami Disaster averaged US $3000 for each person living in the most affected areas, donations to the South Asian Earthquake averaged US $1000 for each directly affected person, but funding to the Niger famine averaged only US $29 for each affected person.[142] In general slow-onset disasters have been more poorly funded than rapid-onset disasters.[143] Disparities in funding create 'orphan' or 'forgotten' emergencies where extensive needs remain unmet.

92. Certain humanitarian agencies make it a priority to identify and provide assistance to forgotten emergencies. Susan Johnson from the IFRC told us that one of the aims of the IFRC's Disaster Relief Emergency Fund (DREF) was to provide support to minor emergencies which might be overlooked by other agencies.[144] In 2005, more than half the allocations from the DREF went to fund responses to small or minor emergencies for which no emergency appeal was launched.[145] Susan Johnson expressed concern that that the creation of the CERF might lead to a reduction in donor funding to the DREF.[146]

93. The CERF, an upgraded version of the Central Emergency Revolving Fund originally established in 1991, is intended to address the dual problems of inequity and slowness in humanitarian financing. We now consider the role of the CERF in improving the equity of the international humanitarian system, and will then examine the role of the CERF in improving the speed with which funding is made available to UN agencies.

94. The aim is for the CERF to total $500 million by 2008, with $50 million safeguarded as a revolving loan facility and $450 million as a grant facility to be voluntarily replenished by international donors. It may prove difficult for the CERF to reach its $500 million goal; total pledges to the fund currently stand at $261 million, with $106 million received to date.[147] Jean-Jacques Graisse of the UN World Food Programme told us that donors were reluctant to contribute funds to the CERF because it meant that their contribution to a particular crisis would not be evident. Donors preferred to be able to contribute funds at the time of a crisis, so that their contribution was visible, rather than having to tell their constituents that their contribution had been made indirectly through a central fund. Jan Egeland argued that this was not the case.[148] If this did occur it would imply that those donors were missing the point, namely that immediate response is more important than which donor gets the credit, and that contributing to the CERF does not preclude donors from acting simultaneously with their own resources. This is even more the case with low profile needs where the ERC wants to respond in spite of the lack of high public awareness or interest. We hope that other donors will follow DFID's lead by contributing to the CERF, forgoing their desire to 'flag' their humanitarian contributions in the interests of facilitating the rapid and equitable disbursement of funds by the ERC.

95. One third of the $500 million is to be allocated at the discretion of the ERC to fund 'neglected crises', in two tranches a year. The ERC recently announced the first tranche of $32 million for ten under-funded emergencies.[149] In its written evidence, ActionAid International expressed concern that "the criteria and mechanisms for the distribution of funds for chronically under-funded crises are still not sufficiently clarified." The CERF mechanism has increased the powers of the ERC by giving him responsibility for the allocation of funds. We hope that Jan Egeland and his successors will respond by ensuring that the allocation process is completely open and transparent.

96. The earmarking of CERF funds specifically for under-funded emergencies is a welcome step towards increasing the equity of the humanitarian system. However, even if the CERF reaches its intended total of $500 million it will still comprise only 4% of annual global humanitarian assistance.[150] The CERF is intended to complement rather than substitute for existing financing mechanisms such as the UN Consolidated Appeals process. Although a very positive development, the CERF alone will not solve the inequity in the international humanitarian sector. As we discuss in Chapter 6, donors still need to do more to improve their monitoring, assessment and needs based allocation of funds.

97. In its written evidence, the WFP expressed concern that the CERF could have the effect of reducing the total funding available from other sources for its operations: "We… worry that some donors may feel their job is done if they contribute to the CERF and then do not help us directly."[151] Given that the WFP frequently issues appeals totalling several hundred million dollars for a single crisis, they see the $30 million cap on disbursements for each crisis (to all agencies combined) as potentially problematic. In our view however, the CERF is just one fundraising mechanism of several which the WFP can use to seek funds, and one of several that most donors will use to provide humanitarian funding. Current progress does not suggest that any significant donors have decided to channel funding solely through the CERF mechanism, which is intended to be a mechanism to provide funds where they have not been forthcoming, or to 'kickstart' funding at the start of a rapid onset disaster. DFID certainly has an ongoing Institutional Strategy with the WFP and has given no indication that it will reduce its funding to UN agencies as a result of its generous contributions to the CERF.

Speed

98. In addition to funding neglected emergencies, the CERF is intended to improve the speed of humanitarian financing, allowing UN agencies to commence critical operations and to fund lifesaving programmes during the early stages of a disaster, when these costs have not yet been covered by other donors. Two-thirds of the CERF's grant funds are to be used to allow emergency rapid disbursement of up to $30 million per emergency. CERF has undertaken to respond to UN agencies' requests for funds within three to four days. In many cases the funds received by UN agencies will then be passed onto NGOs and civil society organisations, which will be responsible for relief distribution on the ground. In its written memorandum, ActionAid International expresses concerns that "the mechanism for applying for and distributing the relief funds may create more layers of bureaucracy rather than enable rapid disbursement of funds… a time limit also needs to be set for disbursement to implementing agencies. The UN should streamline its sub-contracting agreements in such cases and adhere to a similar three or four day deadline." We agree. We have heard in several contexts about delays in the disbursement of funds by UN agencies to NGOs.[152] In the context of humanitarian disasters where the costs of any delay can be measured in lives lost, inefficiencies are even less acceptable. We suggest that UN OCHA incorporates an indicator on speed of disbursement to partner agencies into its evaluations of the way agencies employ the funds it distributes through the CERF. In combination with indicators of quality and effectiveness, the speed of disbursement indicator should affect the distribution of funds in later appeals.

99. In addition to the CERF, the UN humanitarian system raises funds through the Consolidated Appeals Process (CAP) and the Flash Appeal system.[153] The CAP is intended to foster closer cooperation between host governments, donors, NGOs, the Red Cross/ Red Crescent movement, the International Organisation for Migration (IOM) and UN agencies. When a disaster occurs in a given country or region, these organisations work together to produce a Common Humanitarian Action Plan (CHAP), which is intended to be a strategic plan for a humanitarian response. The CHAP is used as the basis for the development of a Consolidated Appeal, which is an appeal for funds for the same crisis by several humanitarian actors together. The Consolidated Appeal identifies a common understanding of the situation, and sets out which agency (including NGOs and UN agencies) will do what and where, using strategic action plans and specific project proposals. The intention is to avoid competing or overlapping appeals.

100. Flash appeals are a tool for generating a structured and coordinated humanitarian response in the first three to six months after an emergency occurs. The UN Humanitarian Coordinator in the country concerned must trigger a flash appeal within one week of an emergency, working in consultation with stakeholders. The Humanitarian Coordinator then collaborates with the UN Country Team and ERC to lead the flash appeal process. Flash appeals provide a brief assessment of urgent life-saving needs and should only include recovery projects that can be implemented within the timeframe of the Appeal.

101. Some donors, including DFID, have criticised the existing flash appeal system, because they feel that flash appeals frequently include projects and programmes which are not strictly emergency-related, or which are excessive. We heard that UN agencies sometimes take the opportunity of a flash appeal to try to fund projects for which they have not found the money elsewhere. DFID told us that there had been internal UN problems with the flash appeal for the South Asian Earthquake. Once constituted, the flash appeal had been scrutinised in Islamabad and elements of it deleted as not particularly emergency-related. However, when the flash appeal was scrutinised in Geneva, some of the UN agency work which had been deleted was reinstated without reference back to Islamabad. DFID felt that some elements of the flash appeal were opportunistic and unnecessary. None of the UN agency representatives whom we questioned about this issue in Pakistan or London were able to give a satisfactory explanation of why this had happened.

102. It is vital that donors are able to rely on emergency appeals being precisely that, appeals to fund interventions which need to be delivered immediately in order to fulfil basic unmet needs. It should not be necessary for donors to feel that they have to scrutinise all the elements of a flash appeal for relevance and urgency. Including excessive or non-emergency programmes in flash appeals is counterproductive for everyone if it makes donors less inclined to fund them. The UN appeals system is an important means of structuring the international humanitarian response but if it does not function as intended, donors may be tempted to channel funds bilaterally to UN agencies, risking gaps and overlaps in the international response. In its 2006 White Paper, DFID reiterates the Secretary of State's commitment[154] to "Promote changes to the emergency appeals process to make 'flash appeals' more realistic."[155] We support DFID`s commitment to improving the flash appeals system, and request that in twelve months time, DFID reports back to us on its progress on this issue.

NGO funding

103. A number of NGOs drew our attention to problems with systems for disbursing funds to NGOs and civil society organisations. The British Red Cross told us: "there are real concerns that funds are committed mainly through the UN system, and that the two other pillars (the NGOs and the RC/RC Movement) may not receive a timely and adequate flow of funds."[156] Christian Aid commented that: "Where the UN acts as a funding source, there is often little money available for NGOs and other civil society groups. Even when the UN has been used solely as a mechanism to deliver resources to NGOs, the system has been slow, unwieldy, inefficient and unresponsive to the needs of affected communities."[157]

104. It is true that most of the initiatives put forward to date to improve funding in the international humanitarian system have been focused on the UN system. Given that NGOs and civil society organisations are responsible for disbursing more than 50% of relief on the ground,[158] it is vital that donors also pay attention to the efficiency of the systems through which they themselves supply funds to NGOs, and through which the UN agencies they fund pass on money to NGOs. We have already discussed the issue of the speed of UN disbursements to partner agencies. One solution which NGOs propose to the problems they have experienced in accessing funds from UN agencies is that they should be able to access funds from the CERF directly.[159] We do not agree. Opening up access to CERF funds to the plethora of civil society organisations working on humanitarian issues would make the process of evaluating proposals and disbursing funds significantly more bureaucratic and time-consuming, negating one of the CERF`s principal advantages.

105. Nonetheless we accept that NGOs have real concerns about the speed, efficiency and extent of funding available to them when funds are disbursed through the UN system. We hope that now the CERF is in place, UN OCHA will turn its attention to the issue of how funds are disbursed to partner agencies. DFID makes regular, annual contributions of over £70 million to UN agencies and the ICRC/IFRC outside the CAP. We recommend that DFID uses its reviews of its Institutional Strategies for working with International Organisations to emphasise the importance of the way in which funds are disbursed to partner agencies.

106. Many donors, including DFID, disburse funds directly to NGOs as well as indirectly via UN agencies. We received positive evidence about DFID`s funding systems for NGOs.[160] During 2005, DFID launched a new Conflict and Humanitarian Fund (CHF) through which INGOs and NGOs working regionally or globally can access more regular DFID funding, outside the context of specific emergencies. This seems to be a positive innovation, but as yet it is too early to assess the impact of the new fund.

107. We heard that DFID had directly supported national NGOs to respond to the South Asian Earthquake. DFID told us that "DFID country offices maintain direct contacts with national NGOs. DFID`s calls for proposals are open to national NGOs."[161] We are concerned that although such calls are theoretically open, national NGOs may lack the capacity to fulfil DFID`s criteria for funding proposals. We recommend that DFID offices in countries prone to natural disasters be encouraged proactively to establish links with, and build the capacity of, national NGOs in the time between disasters, in order to support their ability to apply successfully for DFID funding when disasters occur.

126 Ev 127 [DFID] Back

127 Paragraph 2 of this report. Back

128 Comments made during a private seminar on Humanitarian Response to Natural Disasters held by the IDC, 25 May 2006. Back

129 Harmer and Cotterrell 'Diversity in donorship: The changing landscape of official humanitarian aid', (2005), HPG Briefing Paper 20, London: ODI, available online at www.odi.org.uk/hpg. Back

130 Q 284 Mr Jan Egeland Back

131 Global Humanitarian Assistance, see http://www.globalhumanitarianassistance.org/additionaldonors.htm. Back

132 Q 81 Mr Eric Stobbaerts, MSF; USA Today 'Could US aid to survivors alter anti-Americanism among Muslims?', 1 January 2005 Back

133 Ev 127 [DFID] Back

134 Q 35 Mr Toby Porter; Q 186 Mr Johannes Luchner, DG-ECHO Back

135 The Spending Review Settlement in 2004 gave DFID a significant increase in financial resources up from £4.5 billion in 2005/06 to £5.3 billion in 2007/08.This will contribute significantly towards the Government's commitment to reach an ODA/GNI ratio of 0.7% by 2013 [DFID Annual Report 2006]. Back

136 Ev 188 [ActionAid International] Back

137 See http://www.alertnet.org/thefacts/aidtracker/methodology.htm Back