How reliant are big development NGOs on UK aid money?

UK aid: a big spender. Defence Images/flickr.com, CC BY-NC

It’s been painful to watch the steady stream of allegations against development charities, after reports emerged that aid workers at Oxfam engaged in serious sexual misconduct in Haiti. It has shown the depths of human depravity, along with flaws in the international aid system and the work all organisations need to do to protect the most vulnerable from those who seek to exploit their power.

The threat by Penny Mordaunt, the newly appointed secretary of state for international development, to withdraw UK aid money from Oxfam certainly focused minds – and gave heart to those lobbying to reverse the UK’s historic commitment to give 0.7% of national income in foreign aid. Mordaunt’s influence over the UK development NGO sector is considerable.

In 2016, the Department for International Development (DfID) launched its Civil Society Partnership Review, which set out new ways to support NGOs in the UK and in the developing world. Short on detail, it outlined four new funding streams and removed the mechanism for providing UK NGOs with “core” funding, known as Programme Partnership Agreements (PPAs).

Penny Mordaunt has threatened cuts to Oxfam’s aid funding. Nick Ansell/PA Wire

Core funding would normally cover costs such as staff training and establishing organisational systems. UK development NGOs are just getting to grips with this new funding structure and its impacts have been felt sharply across the sector. One charity, Progressio, was unable to withstand the withdrawal of core funding and closed down in March 2017. Christian Aid froze all recruitment and made redundancies in the 2016-17 financial year.

It’s difficult to say exactly how reliant the sector is on DfID funding. Recent research has shown the complexity of the UK development NGO sector and exposed methodological difficulties in mapping its extent, funding and impact.

Tracking the finances of nearly 900 UK development NGOs, the research showed that the sector is thriving. Donations from members of the public account for a surprising 40% of the sector’s income and is growing. A comparison of a random sample of five household-name NGOs bears this out.

Public vs private

Although the proportions of income received from public donations vary across Oxfam GB, Save the Children UK, Islamic Relief Worldwide, Plan International UK and World Vision UK, my analysis of their most recent financial reports showed that on average, these large NGOs received around 43% of their total income in this way.

These voluntary donation figures include both corporate giving and money donated by the UK public to the Disasters Emergency Committee appeals. Islamic Relief Worldwide received 78% of its funding via public donations – a significant proportion – partly due to donations from across Europe and the US and the levels of charitable giving in the UK’s Muslim communities.

DfID funding to development NGOs sits as part of wider institutional funding, usually from government or multilateral sources such as the EU, UN or World Bank. Across these five large NGOs, their current reliance on funding from institutions, ranged from 17% in the case of Islamic Relief Worldwide, to 58% for Save the Children UK. Total income from DfID included the tail end of PPA payments, as each of these five NGOs received core PPA funding until the end of 2016.

The charities also received different levels of DfID funding – from 1.4% of the total for Islamic Relief Worldwide to 39% for Save the Children UK. And Oxfam GB received only 8.4% of its total income in 2016-17 from DfID.

Contracts bring private players

As with the wider UK voluntary sector, government funding is increasingly awarded via contracts for services rather than grants. New players in the development industry, which are not household names, are also competing for these contracts and there were no development NGOs among the top ten DfID contractors between 2010 and 2016. Instead, private companies such as Adam Smith International, Mott MacDonald and Mannion Daniels dominate, with total contracts in excess of £3 billion for this period. Mannion Daniels, for example, manages the whole of DFID’s Aid Direct Fund – and it also did the research and design for DfID’s Global Health Support programme in China.

But these contracts also represent services that DfID needs to provide if the UK is to meet its international obligations to the Sustainable Development Goals, as well as its 0.7% aid target. Development NGOs are well placed to deliver them with track records of expertise and delivery going back decades – and DfID needs them to apply.

UK development NGOs have been contemplating a future without aid for nearly 20 years and have considered many potential scenarios for their future. ACORD and Action Aid, for example, have already completely transformed their governance structures to devolve more power to the developing world. Elsewhere, a re-thinking of operational models is underway. Some are building their legitimacy in the UK by running domestic programmes with vulnerable communities. Oxfam has even started to consider how to respond to rising political populism.

Most significant, however, is the acknowledgment from some in the sector that NGOs must engage at a much deeper level with the public in the UK about the nature of development work. With such high proportions of NGO funding coming from public donations, this is where the sector’s vulnerability lies – and it’s here where they could face damage from scandals such as the one that has hit Oxfam.