As previous papers have observed^[1], multi-year funding alone does not bring about efficiency and effectiveness gains unless it is deliberately managed to do so. Aid organisations are increasingly planning multi-year programmes (see the section ‘First-level recipients’ reported multi-year humanitarian income’), although they are at different stages in the development of their internal processes and learning. Clearly, funding and programming run in parallel and feed into one another in some circumstances and in some aid organisations’ financial models direct programming approaches. However, this is not the case for all aid organisations. Broadly, there appear to be two categories that define how multi-year funding and programming interlink. Multi-year programming is either driven by the receipt and availability of multi-year funds, or aid organisations programme on a multi-year basis irrespective of the volumes of multi-year funding secured.

The first approach was found to be more common among aid organisations whose mandate is primarily humanitarian and for which a single programme is likely to be funded by a single grant. Many aid organisations consider the availability of multi-year grants to be a guarantor of multi-year programming. In the absence of funding, they are less likely to assume the long-term risk to their programme, whether they self-implement or work with downstream partners. For these organisations, it is likely that multi-year programming is still nascent, or a potential spin-off from the Grand Bargain and the subsequent increases in volumes of multi-year funding they have received from donors. While they have developed multi-year programmes in some larger crises, they still seek further funding for similar programmes in smaller-scale crises.

For multi-mandate aid organisations, the second approach is often more common, with multi-year programming more intrinsic to existing ways of working and less driven by external reforms. These organisations may often plan and programme on a multi-year basis irrespective of funding secured. In these circumstances, the availability of greater volumes of unearmarked income was identified as an enabling factor. These aid organisations build on their long-term in-country presence, and their programmes pursue objectives beyond humanitarian ones. Their internal structures are more attuned to delivering cross-cutting or wider programmes, and they are likely to be supported by greater and more flexible income.

However, several factors complicate aid organisations’ ability to sustain a multi-year approach to programming, both at a country level and more so across a range of country programmes. These include a complex mix of income streams: private or institutional, humanitarian or non-humanitarian, multi-year or short-term, flexible or earmarked, or fully core awards. They may involve varying levels of certainty on timeframe and volume. Aid organisations therefore have to align this mix of income streams to optimise programming. They reported that to be able to programme more confidently on a multi-year basis, they require greater volumes of multi-year funding from donors, which would provide them with greater income visibility.

The Grand Bargain explicitly commits aid organisations and donors to “increase multi-year, collaborative and flexible planning and multi-year funding instruments…ensuring that recipients apply the same funding arrangements with their implementing partners”.^[2] It also commits aid organisations and donors to “increase and support multi-year investment in the institutional capacities of local and national responders”.^[3] Of the 11 aid organisations that provided data, only four shared granular data on the multi-year funding they passed on to second-level recipients. This limited pool of data shows that multi-year humanitarian funding remains primarily directed to international organisations (see the section called ‘Recipient organisations of funding’). And while local and national NGOs reportedly received increasing levels of predictable funding, these remain at very low levels.

Increasing the quantity of funding passed through to downstream partners is complex. Aid organisations are already facing a conflicting choice: deciding between remaining nimble or providing long-term funding to a select number of local and national organisations. The latter is perceived as going against the grain of being agile and able to respond flexibly through diverse partners. However, more evidence is required to substantiate these perceptions.

Conditionalities applied to first-level recipients trickle onward to downstream partners. The restrictions original grants carry are transferred to downstream partners, potentially in addition to other conditions. Funding to downstream partners may also form part of existing long-term agreements and become short-term when directed to specific projects. While larger aid organisations may be able to afford to make multi-year plans based on donor commitments, they do not usually assume the risk of multi-year plans with their sub-grantees.

Aid organisations report that there are currently insufficient volumes of multi-year grants to pass on to downstream partners. First-level recipient organisations report receiving relatively low volumes of predictable or flexible grants for their own operations, which leaves them with limited funds to pass down in similar vein. It is important to note that first-level recipients will also implement programmes themselves – particularly in large protracted crises where they have access, established supply chains and logistical capabilities. In these cases, multi-year funding will not flow to local or national actors.

Some donors stated that they encourage aid organisations to ensure their pass-through funding maintains the same qualities as the original grants. However, official donor requirements for aid organisations to pass on multi-year funding were not reported. As such, aid organisations have the latitude, albeit constrained, to choose how they direct multi-year or unearmarked funding to their partners.