Private giving, public purse: some trends and patterns in the financing of humanitarian response

While a great deal of research has been done on the scale and implications of official funding for humanitarian action, very little attention has been paid to private sources of finance. This article goes over the accounts of some of the major UK agencies, and asks where the money comes from.

Who funds the humanitarian activities of the West’s major NGOs? This is more than an academic question; while arguably the relationship between independent agencies and their primary official donors is based on more than simply funding, encompassing such things as trust and mutual respect, questions are being asked about the desirability of accepting official money in particular circumstances. This unease, coupled with a sense that official donors are taking a more hands-on approach to the management of their humanitarian assistance funding, has prompted a large amount of recent work looking at the size of official funding and the politics around its giving. The flip-side of the coin – the size and source of private finance, from donations, legacies, trading or investment – has gone relatively unmarked. As this article shows, this may be missing a very sizeable part of the picture.

The scale of official funding

The last ten years have seen a sharp increase in the amount of official funding for humanitarian activities. Research by the Humanitarian Policy Group at ODI shows that, between 1990 and 2000, official humanitarian assistance from the major Western donors increased almost three-fold, from just over $2 billion to nearly $6bn. The bulk of this money comes from just a handful of countries; the US heads the list, usually by a factor of three or four.

Changes in the amount of funding to humanitarian activities have coincided with changes in where this money is going. Although data is weak and the picture complex, these shifts appear to have broadly favoured NGOs at the expense of the ‘traditional’ multilateral recipients, primarily the UN. In the UK in 1999–2000, for instance, the Department for International Development (DFID) disbursed some £221 million ($350m) of its humanitarian assistance directly through NGOs and the Red Cross, and in earmarked funding to the UN; this was around double the £102m ($160m) that went in unearmarked funding to the multilaterals. For the European Commission, the picture is starker still: just a fifth of its humanitarian spending went through the UN agencies in 1998–2000.

Official versus private: the picture for individual agencies

How have these shifts played out in the funding fortunes of individual agencies? This article looks at a necessarily limited sample, namely agencies that are members of the Disasters Emergency Committee (DEC), an umbrella fund-raising organisation bringing together some of the UK’s largest humanitarian NGOs. Data is largely drawn from the annual accounts of these agencies, and looks at the years 1997 and 2001. The research was conducted between September and October 2002; details of most NGOs’ annual accounts were only available up to April 2001.

Two important distinctions need to be made at the outset. The first is that several of these agencies – Oxfam, the British Red Cross, Save the Children, Care, Christian Aid, CAFOD, Tearfund and World Vision – are part of larger international federations. The Save the Children alliance, for example, incorporates 32 member countries, with a total worldwide income in 2001 of more than $430m. This article looks purely at the finances of the UK sections of these organisations. The second point is that, at least in terms of how they report their spending, some of these agencies are significantly more ‘humanitarian’ than others. Thus, while in 2000 Merlin reported 90% of its expenditure as going on ‘humanitarian’ activities, Oxfam allocated 37%, and Help the Aged just 2%.

These caveats aside, an analysis of recent accounts yields three important observations:

1. Overall levels of received income have increased enormously.
2. A significant proportion of this income is from ‘private’, as opposed to official, sources.
3. The smaller the agency, the larger the proportion of funding coming from official sources.

The growth in agency income

Table 1 shows the extent and rate of the growth in the income of those DEC agencies for which information was available, in the years 1997–2001.

For most of the agencies looked at here, levels of income increased substantially; for some, notably the British Red Cross, they more than doubled. Overall, the income of the agencies reviewed here grew by a startling £337m ($532m). While around two-thirds of this is taken care of by a massive expansion in the income of just two of these agencies, Oxfam and the British Red Cross, across the board most did well. (One notable exception to this generally buoyant picture is Children Aid’s Direct, which ceased to exist in 2002.)

Official versus private funding sources

Figure 1 illustrates the proportion of total income coming from official government donors.

These figures confirm that, in 2001, the DEC agencies received a significant – but for many, not a preponderant – amount of their income from official sources. Overall, official funding accounted for more than £281m out of a total of just over £900m, or around a third. Official sources of funding include grants received from multilateral and UN organisations, and income from government donor bodies. For the majority of the agencies looked at here, the primary official contributor has been DFID.

Figure 2 shows that, while DFID’s contribution did not comprise the overall majority of official income sources, it was usually the most significant. Funds derived from the second-largest contributor – ECHO – accounted for a larger proportion than DFID only in the cases of Concern and Merlin (£6.4m and £2.5m respectively). In the case of Oxfam, the largest single contribution to total official funding was in the form of food aid received from the World Food Programme – £16m – with donations from the EU totalling £10m.

Smaller versus larger agencies

Figure one also shows that the degree of dependence on official funding varied significantly among the agencies reviewed. Thus, for Oxfam and Save the Children official funding accounted for around a third of total income. For the British Red Cross, it was about 45%. Faith-based agencies too relied less on official funds. Tearfund, for example, received about £2.5m from official sources, out of an overall income of over £33m. For the smaller agencies, however, the picture can be markedly different: official funding accounted for over 80% of Merlin’s income.

This wide variation is a function of the number of different funding sources available to each agency. Larger agencies and faith-based organisations have access to a wider variety of funding streams than others, and so official funding occupies a comparatively smaller position overall. Oxfam is sufficiently massive and well-endowed to mount the kind of large-scale appeal and sustained advertising campaign necessary to mobilise high levels of giving from private individuals, and can maintain an extensive merchandising and retailing business (in 2001, Oxfam incurred trading costs of £55m, and spent £15m on fundraising). Similarly, faith-based agencies have access to a network of ‘funding points’ and advertising opportunities through churches and places of worship, along with a sympathetic constituency whose faith presumably inclines them to give for the sake of the less unfortunate.

Figure 3 depicts this by breaking income sources down in more detail. It shows three individual agencies, one large, secular agency (Oxfam); one faithbased agency (Christian Aid) and one relatively small agency (Merlin).

These charts clearly show the different ways that agencies can access funding. Thus, Oxfam draws heavily on its trading income, and from donations and legacies, while Christian Aid benefits substantially from the mobilisation of its constituency during the fund-raising of Christian Aid Week, on income from its own emergency appeals and from legacies. By contrast, Merlin depends almost exclusively on just two sources of income, official funding and private giving – there is no mass access of funds from a large-scale, established campaign, no investment income and no trading activity.

Some tentative conclusions

The sample looked at in this article is too small to enable any firm conclusions to be drawn concerning wider trends in the NGO sector globally. Given the variety and heterogeneity of the sector, there will always be exceptions to any rule. That said, some tentative conclusions can be advanced. The first is probably beyond dispute: NGOs are increasingly important players in the delivery of humanitarian assistance. It is possible that we are seeing a consolidation in the sector, with smaller, less well-endowed agencies ceasing to operate, or being incorporated in some form within larger and more powerful organisations. It is also possible that, in some instances and some sectors, NGOs may directly challenge the UN agencies as lead providers of aid.

Second, agencies draw on a wide variety of sources for their funding. This may seem self-evident, but it is important to say, not least because it has consequences for debates over agency independence. Some agencies, probably the smaller, secular ones, may be disproportionately reliant on the funding they receive from government sources; for others, and this is likely to include the larger ones like Oxfam, official funding is likely to account for a smaller slice of the overall funding pie.

It is not axiomatic that reliance on official funding equals a loss of independence; the relationship between funder and recipient is too complex for that. But it may be useful to take a look at precisely how that funding relationship measures up to the many, perhaps more significant, sources of finance open to those agencies equipped to take advantage of them.

And third, researching this article highlighted just how difficult it is to gather the kind of reliable, comparable figures that would enable in-depth analysis of who funds what, and where the money goes. There is, for instance, no accepted definition of ‘humanitarian action, for example, and reporting on humanitarian expenditure is inconsistent across the sector. Given the potentially significant amounts involved, the political environments in which they are given and the crucial importance of the activities this money funds, more work in this area is surely needed.

Harvey Redgrave is a public policy researcher for the Office for Public Management, a not-for-profit consultancy. He wrote this article in a private capacity.

References and further reading

This article drew heavily on HPG research into changing patterns of funding and disbursement. See in particular Joanna Macrae et al., Uncertain Power: The Changing Role of Official Donors in Humanitarian Action, HPG Report 12 (London: ODI, 2002); and Joanna Macrae (ed.), The New Humanitarianisms: A Review of Trends in Global Humanitarian Action, HPG Report 11 (London: ODI, 2002). Both reports, together with summary briefing papers and background papers, are available on the ODI website at www.odi.org/hpg/publications.html.