Waylaid Dialectic

March 4, 2012

Of Overheads and Understanding

Filed under: Aid — terence @ 5:56 am

Chris Blattman comes close to making sense:

An East Africa-based journalist writes me with an interesting question. An new NGO is trying to harness a firm’s distribution network to get humanitarian aid to children.

A question. [The NGO] were unable to receive the grant direct from [the donor] so had to find an ‘accountable body’. For this service, they were quoted 17% of the project’s budget – by a UN organisation. Can you relate fact or opinion on that at all?

[The NGO] eventually found that [a pan-African governmental body] was able to provide the service for free, with additional benefits. But UN, World Bank etc. apparently make having an accountable body to channel funds a very costly thing.

I’d be extremely grateful if you have time to share thoughts.

This is indeed a pet peeve of mine, but my ire is not directed at donors like DFID or the World Bank or UN. My response:

My opinion: 17% is an unfortunate expense but a rather common rate for administration, and even low by many standards.

It’s a requirement driven not so much by the multilateral donors, but a consequence of the fact that the giving public and governments have close to zero tolerance for misuse of funds.

This drives a Byzantine and expensive accounting system which partly reduces risk of misuse, and partly gives the multilaterals cover (“we did the best we could”).

This discomfit with misuse gets amplified by the press who tend to tend to report on graft and mismanagement more than success.

So the root cause is the failure of the public and donors to think about the high cost of extreme accountability.

It would be nice of the donors could take a sensible stand against this silliness. I’m not sure they are terribly concerned, or even cognizant. Surely it has occurred to some, but (in my experience) cost-effectiveness is so far down the list of most NGO and donor priorities it may as well be left off.

Thoughts from the NGO and donor world?

Three thoughts:

1. In my experience donors are cognisant of the issue of overheads. Too cognisant. And once again it’s not their fault. It’s contradictory, but just about the only thing the public and politicians hate more than the thought of aid being squandered on corruption is aid being squandered on overheads. Which is why the current Minister in charge of (vandalising) New Zealand’s government aid programme made a lot of noise in his early days about how he was going to reduce overheads and trim fat. Similarly, this is why NGOs often (and sometimes quite dishonestly) promote how low their overheads are.

2. High overheads are not always a bad thing. Development work is difficult. For it to succeed projects need to be well scoped, understanding of context needs to be high, in country relationships need to be built and maintained, ongoing learning needs to occur, M&E needs to be strong, and staff need to be paid. And good staff need to be paid well. This costs money. Better high overheads and success than low overheads and yet another aid disaster.

3. I’m with Chris, in that I think it would be nice if someone could take a stand against a zero tolerance approach to corruption (along with a series of other development myths – like the low overheads one). It’s often very hard for NGOs to do this – no one wants to be the first penguin off the ice sheet. It’s harder still for government aid agency staff – who are legally bound to follow the lead of their political masters. High profile development academics on the other hand…now there’s a group who might be able to make a difference.

Start a campaign Chris – I’ll happily join.

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