In the first blog of this series, we spoke about the challenges of being small and accountable. In this second instalment, we talk about the solutions that our community has found to overcome or partially address the challenges.

None of the accountability challenges mentioned in the first blog are new, or unique to Accountability Lab. Many organizations are valiantly taking up the “shifting the power” mantle while trying to keep the lights on. The US Office of Management and Budget (OMB) has recently increased the de minimus rate (the indirect cost rate applied to grants for those that do not have a negotiated indirect cost rate) from 10% – 15%; and they have also increased the threshold for expensive Uniform Guidance Audits from $750,000 – $1,000,000.  These are welcome changes and may save many smaller entities tens of thousands of dollars over the lifetime of a grant. Further, some philanthropic donors are willing and able to pay for a broader array of ‘overheads’- like the Hewlett Foundation, who accept an organization’s overhead costs (even if they are higher than the traditional 10%) or MacArthur Foundation, which adopted a policy of providing an indirect cost rate of 29% of project costs on all project grants to nonprofit organizations. 

These and other donors helpfully prioritize core grants, leaving it up to the grantee to decide what is necessary to cover their accountability expenses. But these philanthropic grants- in the governance space at least- are very rare and difficult to get; while the majority of donors continue to restrict funds significantly. In some cases, grants do not allow for staff costs or overheads; in other cases, they require co-financing (in theory as a show of co-ownership for the project outcomes but in practice a barrier to entry for many small organizations). These restrictions force organizations to make impossible decisions, deprioritize accountability or sacrifice the money.

Ten Recommendations for Donors to Support Local CSO’s to Achieve Accountability Outcomes:

1. Prioritize core and unrestricted grant funding: Despite the fear that organizations will ‘squander’ unrestricted money, the Center for Effective Philanthropy (CEP) study on the efficacy of $14 billion in unrestricted grants from MacKenzie Scott found that recipients were able to be more impactful by investing in pay equity, capacity, innovation, and operational initiatives that improved staff morale and creativity. 
2. Ensure overhead and indirect cost recovery for everyone: Donors should mandate a minimum overhead amount applicable for everyone. Ideally, grants should be unrestricted or have limited restrictions (see the Power Funding model). However, where this is not possible, donors and the prime recipients of grants must include cost recovery and feasibility as part of their sub-awards. This should cover both indirect and direct costs and will take the pressure off local NGOs to use overhead resources to cover direct project costs like M&E and finance.
3. Leverage purchasing power for specific services: Donors should take advantage of broader purchasing power and provide access to hardware and software discounts for grantees and other organizational resources like legal support, security advice from organizations like Open Briefing, broader accountability support from Accountable Now, and technical budgeting support from organizations like Fair Funding Solutions, at the cost of the donor, not the grantee.  
4. Simplify financial and narrative reporting for better program outcomes: Often the grantee is only one recipient amongst a host of grantees. However, grantees are frequently saddled with multiple, complex reporting frameworks that prioritize the high-level (systems change) outcomes that a donor is seeking over the activities that the grantee is actually carrying out. We can increase the effectiveness of reporting by building in flexibility around reporting. In 2019, for example, OSF’s Economic Justice Program rolled out a ‘menu’ of reporting options for grantees (from a Powerpoint to a podcast, to published blogs or articles). This all rolled into a larger toolkit that aims to support and inspire better MEL among donors, grantees, and their partners.
5. Contextualize funding mechanisms. Contracting, as a funding mechanism for democracy and governance work, is inherently disadvantageous for those lower down the donor chain. The profit incentive (high output, quick timeline with less of a focus on outcomes) of contracts disincentivizes contractors from supporting their implementing partners to achieve full cost recovery. In addition, the small, activity based grants that local entities receive from contractors infrequently supports the local ecosystem in any way. Grantees cannot hire full time staff or cover much needed overheads with multiple small short-term contracts.
6. Remove the co-financing requirement for grants: Grantees should not need to prove that they are co-responsible for a project by providing co-financing. The money for co-financing has to come from somewhere, and more often than not, it comes from overheads or “in-kind” staff time which inevitably then goes unpaid/unfunded. 
7. Support grantees to navigate complex operational barriers to receiving money: Grantmakers should prioritize guiding grantees through the complexities of their own internal systems. Alternatively, there should be dedicated in-house support for grantees (over time not just through one-off briefing sessions) when they want to apply for grants, including the best way to budget, understand templates, and register on the grant application platforms. We need to support those who are actually doing the work to do it, not just those who can navigate and overcome the bureaucratic hurdles of an application process.
8. Prime awardees have the same responsibilities to their sub- grantees as to their donors: Prime awardees frequently place unnecessary burdens on sub-grantees to comply with rules and regulations that the donor is not even demanding (i.e weekly reporting when the donor only needs quarterly reports). Even worse, prime awardees have been known to actively cut/ change/ squeeze local implementing partners’ budgets so much that the work becomes impossible. Donors should monitor and build into contract agreements the prime awardees’ ability to ease the administrative burden of program implementation that is frequently placed on their subgrantees.
9. Grants that support majority world participation in conferences, workshops, and convenings are critical to ensuring representation at global decision-making tables: We will never increase the share of majority world voices at global convenings if we do not pay for them to be there. Grants need to make allowances for conference/ workshop/ convening travel. Meetings held in countries with visa restrictions must ensure that participants have enough time (8+ weeks) to apply for visas and have sufficient funds to cover travel, accommodation, and meal stipends. 

We all have an important role to play in the localization agenda and it is not just capacity building: Finally, as we prioritize the localization agenda and the importance of local contextual knowledge, we should continue to inform and improve our work with knowledge from the outside. INGOs should consider moving their focus from ‘capacity building’ and acting as intermediary funders (where they frequently impose ever more complex and rigorous compliance and accountability thresholds on subgrantees) to acting as conveners, actively closing the proximity gap between ‘local’ action and global influence. Read Ruth Levine’s excellent substack post about this issue here

Jean Scrimgeour