Written by - Mohammad Fhakrul Islam, Partnership Coordinator, Start Fund Bangladesh and Samia Rahman, Analyst, Start Fund Bangladesh
Indirect cost recovery (ICR) or non-programme attributable costs (NPAC) have long been charged by NGOs when applying for funds from donors or “fundermediaries”. These “recovered” costs can be significant for spending on institutional growth. While INGOs – who usually secure majority of foreign aid – are able to charge these costs, national/local NGOs who implement projects by partnering with INGOs, have unfortunately not been able to claim these kinds of unconditional budgets for their organisational sustainability.
Start Fund Bangladesh, since its inception in 2017, has been advocating to change the deep-rooted partnership practices that hinder localisation commitments, one of which is the equal sharing of ICR. Although changes were not reflected initially, in 2019 a few Start Fund Bangladesh INGO members started negotiating with their head offices and became successful in ensuring a share of ICR went to their local partners. We spoke to three such organisations: World Vision Bangladesh, Care Bangladesh and Save the Children Bangladesh, to understand the current scenario and how they paved the way to change their partnership practices surrounding ICR.
The hurdles
All of the organisations recognised three major difficulties:
The first and most difficult challenge intermediaries face is contesting the system of their organisations. Since INGOs are large organisations with headquarters and regional offices, they often need to adhere to strong but sometimes dated policies. Since these policies apply to all country offices operating under the INGO, it becomes difficult for one local country office to try to implement a new change in the existing policy where there is no mention of sharing ICR with partners.
“World Vision has operations in over 100 countries. They are structured, systematic and process and policy-oriented. When they want to change anywhere, they have to knock at every point and go everywhere.”
Mr Dulon Joseph Gomes, Humanitarian & Emergency Affairs Director, World Vision
Secondly, grants of INGOs are usually centrally-managed by offshore headquarters who, upon winning a funding source, keep the major percentage of the ICR, before transferring the grant to the local office. This makes it even more difficult for its country INGO offices to share the ICR with partners as they receive only a minor share of the ICR/NPAC.
Finally, a lack of sensitisation across departments within the INGO’s country office causes another setback. When applying for new projects, programme teams work together with other cross-functional teams such as finance, contract management and grants who have strong liaison with senior management. Although programme teams are often sensitised on localisation issues and have a greater understanding of working with local partner NGOs, other teams may not always have the same perception. Therefore, for a simple change in partnership practice, vetting of multiple departments and personnel is needed.
Potential solutions
When asked on how they overcame the difficult obstacles and ensured ICR sharing with partners, the three member INGOs highlighted the importance of having a clear understanding of the localisation agenda. Mentioning the important roles local/national Civil Society Organisations (CSOs) play in implementing programmes in local communities, sustaining these organisations is a responsibility of the intermediary INGOs which can be significantly supported through sharing of ICR. When the connection between localisation and sustainability of local NGOs becomes clear, it can then be used to advocate for:
- Reforms in existing policies of the INGO at a global level
- Negotiations with offshore headquarters for local transfer of funds when donor or funding agency is present in the same country as the local INGO regional office
- Cross department sensitisation of the need to share ICR
“In such decision making in general, if Finance team is sensitised they can really influence senior management. Other departments like Contract Management, Grants, Partnerships etc. can also influence such decision making. If they play positive roles, then senior management hears from them. In fact, senior management depends on the information from these departments. Their logic and combined efforts make it real.”
Kaiser Rejve, Director-Humanitarian & Resilience, CARE Bangladesh
Significance of ICR sharing
Getting a share of ICR allows partner organisations to get a sufficient budget to think beyond a response – they are able to think about their organisations – improving their systems and enhancing their capacity. In such a case, one does not have to resort to unfavourable practices like low staff salaries or overstretching the team’s capacity in order to make ends meet.
“While we made the budget, the partner was also happy to get ICR in addition to their staff and other costs. This encouraged partner to do things rightly. There could be an agreement that, for example, it would be used for capacity building or internal control management or organisation’s development. We can do due diligence exercise. If we can make partners use this money to implement the action points, we can see positive results. From a value for money point of view, it is sound.”
Md. Mostak Hussain, Humanitarian Director, Save the Children Bangladesh
Sharing of ICR can truly empower organisations to move the localisation agenda a step forward. However, organisations need to have their own strategy to use that opportunity to build and sustain their organisational systems. All funding agencies and intermediaries also need to reflect upon and facilitate this practice. If the front-fighting agencies which are closest to affected communities are not given their fair share of ICR, it can impact humanitarian responses in the long run when these local organisations die out.
Start Fund Bangladesh’s progress through its members shows how continuous advocacy can gradually allow partnership practices to evolve. From 2019 till 2020 the sharing of ICR between international members who accessed the fund and their local partners stood at 73%:27% with more than £21,000 going to local partners as their ICR; this shows significant progress from 2018 when local partners had received 0% of ICR whilst partnering with international intermediaries under the Fund.
Read more about Start Fund Bangladesh and Localisation.