In 2020-2022, the Start Network conducted an innovative ‘localisation pilot’. It was preceded by a new due diligence approach (DDA) that first created the ‘gold standard’ by comparing the requirements of different institutional donors, and then assessed and put agencies into three categories or ‘tiers’. Tier 3 agencies met the gold standard; Tier 2 agencies approached it but did not have all relevant practices formalised; Tier 1 agencies met minimum requirements for Start Network members even if they did not meet some core compliance requirements of donors. The ‘pilot’ consisted in offering direct funding national/local Tier 2 NGOs, for a first, fast, emergency response to a sudden onset crisis. The initial ceiling for direct funding was set at £ 30,000.
The evaluation shows that all stakeholders saw the pilot as positive: The tiered DDA opened up membership in the Start Network for more, often smaller, agencies. The direct funding tended to enable a faster response than when subgrants had to be formalised with an intermediary, and for some it provided ICR for the first time ever.
One of the most important insights from the pilot is that a compliance profile does not constitute a risk profile. DDAs provide information about the degree to which an organisation meets expectations or requirements and can therefore be considered a ‘compliance profile’. It says little to nothing about programmatic and contextual risks and is therefore inevitably incomplete. It cannot cover, for example, the sometimes-vital organisational capability to navigate a landscape full of political sensitivities. Due diligence assessments, the way they remain practiced in the international aid sector, fail to acknowledge that success depends on the collaborative action of different agencies in the ‘delivery/action chain’. Different agencies face somewhat different risks: collective action success requires more risk sharing, less risk transfer, often to those who are less well-resourced and less well prepared to manage it. The implication is that the compliance profile should not be the only consideration in the decision to provide funding to that organisation.
The second key finding is that an arbitrary ceiling for direct funding to national/local agencies in general, or to those that are in a Tier 2 category (where some INGOs may also find themselves), makes no sense. The initial £ 30,000 was considered too low for the CSOs to even apply for: it did not justify the transaction costs and it was so small that any meaningful coverage of even the ‘most vulnerable’ was impossible. During the pilot, the ceiling was raised to £ 60.000 – comparable to the current ECHO suggested ceiling of Euros 60,000. As Tier 2 agencies could access larger amounts from the Start Fund through a Tier 3 intermediary, even the raised ceiling remained a disincentive to go for direct funding. De facto, Start Fund’s ceiling was still based on the due diligence assessment, and therefore contradicted the insight that a compliance profile does not constitute a risk profile (as learned thanks to and during the pilot). Find here the full report in English; en français, en espagnol. And the summary in English.