This IELG-commissioned study looks at the strengths and challenges of strategic (unrestricted) funding across 37 organisations drawing on Independent Progress Reviews carried out for DFID’s PPA funding recipients after the first 18 months. It seeks to understand the added value of this funding for CSOs, their impact populations, funders and the wider development sector. The key finding is that NGOs benefit significantly from having access to long term, consistent funding that can be used in a flexible manner.
The evidence collected represents a significant body of work recording how organisations are using and attempting to track strategic funding. NGOs are building a compelling case for strategic funding, its importance and how it enables them to deliver activities and support initiatives that would be otherwise difficult to reach.
The study finds that organisations benefited from having access to strategic funding in numerous ways. The most evident strengths are NGOs using strategic funding to:
- Invest in strategic development
- Increase sector networking and sector-wide learning
- Invest in innovative programmes and approaches
- Strengthen organisational systems and processes
Having access to a multi-year funding agreement for unrestricted funding has allowed PPA-funded agencies to better plan these kinds of activities. Improvements in the area of strategy and organisational development are enabling NGOs to better understand what works, make more informed decisions about their activities and resource allocation, and ensure activities are closely aligned with the needs of beneficiaries.
A high level of trust from the donor is necessary to make strategic funding work, including: buy-in; confidence in the strategic direction and leadership of an organisation; deeper understanding of how an NGO works; and more upfront due diligence.
The study finds that the challenges faced by organisations are as much about overall organisational development as they are about being able to account for funding to a particular donor. The most evident challenges are:
- Having to measure the overall impact of the funding throughout the organisation
- Evidencing impact of the funding on beneficiaries
- Evidencing impact of the funding on advocacy activities
- Tracking spend of the funding through appropriate systems and processes
Although the wider sector benefits evidence in this study is limited, it is promising and further exploration is recommended. Strategic funding:
- Can have a significant impact on performance when the conditions are right
- Provides the space and resources to NGOs to share their experience with the wider sector and contribute to sector level initiatives.
