Funding to local actors: evidence from the Syrian refugee response in Türkiye: Chapter 4
Greater financing alone is not enough to increase locally led action. The quality of the funding that is passed to local actors is also critical for enabling an empowered and needs-driven local response. Quality funding refers to a range of different properties (see Box 1) such as the level of earmarking and the duration of funding, with certain characteristics having greater value in different contexts. In protracted crises, multi-year funding is especially important and was raised as a key issue by LNAs.
The following section is based on key informant interviews with LNAs and international actors in Türkiye and aims to understand the quality of international funding that reaches LNAs in Türkiye. While this study looked at both humanitarian and development funding flows, the following analysis is predominantly concerned with humanitarian funding as the LNAs interviewed received the majority of their international funding through INGOs and UN agencies, which is likely to be humanitarian (see Figure 12), despite many interviewees considering the work they do to be more related to development activities. In some cases, LNAs are not aware of who the donor is for the projects they implement with an international partner.
Minimal progress seems to have been made in increasing the duration of funding agreements for actors supporting Syrian refugees in Türkiye since commitments made at the World Humanitarian Summit in 2016. Most LNAs interviewed reported receiving an average grant length of one year or less, with three receiving funding from some international organisations of just six months. In total, less than half (7/17) of the local organisations interviewed reported having received a grant agreement of more than two years. Those that did included partnerships with UNDP, GIZ and the UN Population Fund. Similarly, most international organisations interviewed reported they also only received 12-month funding on average from donors and pass on the same duration to their local partners. There is some evidence of donors lengthening funding agreements, for example the US Bureau of Population, Refugees and Migration increased its possible partnership agreement length to three years (with funding agreed each year) based on feedback from partners Two other donors interviewed acknowledged the need to extend programme funding to two to three years. Though short-term grants are extended multiple times in some cases, this lack of certainty impedes strategic planning for both international and national organisations but especially for L/NNGOs as indirect recipients.
Short-term funding affects programme effectiveness. A recurrent issue emphasised by interviewees was the inadequacy of short-term funding for programmes designed to support medium to longer-term durable solutions for refugees. For example, one-year funding cycles for higher education, livelihoods and social cohesion programming were reported to be impractical, and not effective. The impact of short-term funding on programming also impacts L/NNGOs’ relationships with the communities they support, for example one local women’s organisation lost funding from a UN agency for their case management service, which impacted trust with their client group. Short-term funding also limits the opportunity to develop more long-term strategic relationships with intermediary funders.
Short-term funding grants also affect the sustainability of LNAs. Issues around staff retention were raised by interviewees, with organisations unable to provide the job security larger international organisations can offer, as well as the inefficiencies of hiring and training up staff on short-term contracts tied to specific projects. One organisation reported that it cannot expand services as it has a policy to not hire staff on short-term contracts. Short-term grants also mean a large proportion of staff capacity is spent delivering reports for grants that are finishing and writing new proposals to secure further funding. L/NNGOs emphasised that these inefficiencies are both time and resource intensive and detracting from their core activity of supporting vulnerable communities.
Funding for the Syrian refugee response is generally not considered flexible by INGOs and UN agencies, often the first-level recipients, or by LNAs. Donors mainly provide funding as project-based grants, with little flexibility outside agreed activities and targets. This limits the extent to which international organisations can pass on flexibility to downstream partners. L/NNGOs interviewed reported that the vast majority of the funding they receive from international organisations is tightly earmarked to geographical areas and sectors. A few interviewees reported that they receive less restrictive funding from Gulf donors and non-Western INGOs or funding from INGO emergency appeals. These non-traditional donors were considered less ‘strict’ by some interviewees due to different procedures and approaches. National organisations with international affiliation might be able to access unrestricted funding from their partner affiliates more easily, but further research is needed to determine whether these opportunities are used by national affiliates.
Earmarked funding can restrict how locally appropriate the response is and reduces L/NNGOs’ ability to meet the needs of refugees. Local actors interviewed reported that funding is allocated according to donor priorities, rather than being locally led, and that projects are not based on local organisations’ needs assessments. L/NNGOs want to be able to better influence and steer funding priorities that meet the needs of all refugees and vulnerable communities, rather than being limited within the parameters of donor-set objectives. However, the reality is that L/NNGOs generally access funding through answering specific calls for proposals from international organisations that leave little room for L/NNGOs to influence donor funding priorities.
L/NNGOs had different experiences when it came to wider budget flexibility, such as the ease of extension, reprogramming and flexibility between budget lines, depending on the donor. Generally, larger national organisations reported experiencing more flexibility, though this may be because they receive funding from a greater number of donors. Some interviewees who receive funding from Gulf donors commented on the relative flexibility in grants compared to Western donors in terms of project revision and reporting requirements. Overall, while the lack of flexibility from Western donors was generally considered to be counter-productive, a few L/NNGOs interviewed supported this strict approach as it was felt to improve quality of programming.
Overall, this inflexible, short-term funding means L/NNGOs commonly report that international organisations are disproportionately focused on compliance, numbers and outputs, rather than outcomes and impacts of projects. As one local organisation reflected: “they are so fixated on the finance that no one is bothering with the quality of the work. We get so much feedback about financial issues but not much about other dimensions”.
As more and more internationally funded programming in Türkiye is implemented through LNAs, including government institutions, the issue of overheads being claimed at different stages of the transaction chain has been a source of much debate. Overheads, or indirect costs, broadly refer to the costs incurred to manage an organisation, but which are not directly attributable to a specific programme. In recent years there has been significant advocacy promoting the pass-through of overheads to L/NNGOs, which is considered one of the most effective ways to strengthen local institutions and support sustainability.
In Türkiye there are signs of progress with some L/NNGOs reporting they are more able to recover overhead costs now than in the past. Most L/NNGOs interviewed received some indirect funding or overheads from some of their international donors but this was inconsistently provided. L/NNGOs are often more reliant than international organisations solely on grant funding to cover their organisational core costs and overheads. Only a limited number of L/NNGOs are able to supplement grants with public fundraising that can be used to cover overheads, and the dependency on grant funding is even higher for smaller L/NNGOs and refugee-led organisations.
UNHCR, which implemented a new global policy of 4% overheads to local partners in 2019, and other organisations such as GIZ, were reported as providing unrestricted overheads in some cases. IFRC shares equally the overheads it receives from ECHO with the TRC. Other organisations, especially INGOs, were reported as only providing administrative costs as itemised budget lines rather than as unrestricted funding. Larger, more experienced L/NNGOs reported that the provision of overheads has changed over time, and that they have grown in confidence to advocate for these costs. Smaller organisations would seem to struggle more, for example LIFT applies an overhead percentage only on its larger grants and not for organisations accessing smaller grants.
L/NNGOs reported various challenges as a result of not being able to consistently cover overhead costs, including neglecting investment in their organisational capacity. This includes activities such as staff training, developing and improving organisational processes, policies and initiatives as well as resourcing the time to identify new funding sources to improve financial sustainability. Furthermore, without overheads, L/NNGOs are less able to meet government liabilities and manage risk, for example by covering gaps in funding that can arise between project grants. This can especially affect support staff positions that may be co-funded across various grants with different start and end dates, demonstrating the impact of repeated short-term grants rather than multi-year funding. Some organisations interviewed have had to make staff redundant as a result. Despite the uneven application of the overhead costs, at least some INGOs seem to be aware that the regulatory environment in Türkiye for both INGOs and L/NNGOs can mean that organisations accrue unexpected costs and recognise the need to have a standard overhead application that can support the operations of L/NNGOs.
A key barrier to better quality funding is that much of the funding which reaches LNAs in Türkiye is channelled through short-term, tightly earmarked humanitarian funding instruments that often require international funding intermediaries. Most of the international grant funding flows captured in this research were reported to come from donor humanitarian budgets, rather than development budgets, which generally operate on shorter-term funding cycles and often have eligibility regulations requiring that L/NNGOs access funding through an intermediary, most notably ECHO. For example, the largest programme of support for refugees, the ESSN, is funded by ECHO in one-year grant cycles. International intermediaries interviewed acknowledged the challenges a lack of quality funding poses for their local and national implementing partners, and reported that, in most cases, they pass on funding to partners with the same conditions they receive from donors. As a result, international organisations face many of the same challenges that stem from short-term and restricted funding. However, as local organisations often do not have direct access to donors, some of those interviewed expect international partners to advocate on their behalf, as well as create space for L/NNGOs to directly advocate to donors, around better quality funding, including direct funding.
L/NNGOs also reported that a lack of budget flexibility from international partners stems in part from a limited understanding and recognition of the context in Türkiye, including employment law. Examples given include a lack of understanding of the inclusion of severance pay in project budgets, a lump sum which must be held back by an employer in the case of an employee leaving, as required by Turkish labour laws. While progress has been made on this issue, interviewees reported how challenging it is to repeatedly explain these requirements to different funders. One organisation reported that international organisations expect local organisations to be able to cover these costs through other sources, but with limited access to overheads this is challenging for local actors. Other organisations flagged the problems they face having to return funds considered ineligible by international auditors who do not understand or recognise Turkish legal requirements.
Overheads are inconsistently passed on to LNAs, though INGO staff interviewed acknowledged the issues and supported a more consistent approach. Different donor rules around overhead rates and internal organisational policies, for example which see headquarters automatically deduct overheads, were given as reasons why overheads are often not able to be shared with downstream partners at the country level. Some INGOs interviewed tried to find ways to still support partners, for example by asking partners to include administrative costs as direct programme costs, and others reported that country office staff were internally advocating with their headquarters for policy change. However, a result of this lack of standard approach means that overheads must be negotiated per contract between international and national partners, with L/NNGOs having limited leverage in these negotiations. Furthermore, despite these good intentions, the reality remains that international organisations would most likely not accept a project without overheads while frequently expecting this of their local partners. The issue of overheads has now been taken up as a global policy priority (e.g., Grand Bargain localisation caucus) and action is expected to be seen on this issue soon.
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The IASC Results Group 5 are currently developing guidance for UN agencies and INGOs on the provision of overheads for LNAs (expected to be published in October 2022). The Grand Bargain localisation caucus established in June 2022 is also focusing on the issue of overheads for local partners.Return to source text