APPENDIX 3
Memorandum from CARE International UK
INTRODUCTION
1. The consultation by the House of Commons
International Development Committee on the European development
budget comes at a time when the European Commission (EC) is restructuring
itself in a major way. On the one hand this may pose an opportunity
to seek to influence the working practices of the new structure
before they are set in stone; on the other hand, it makes it difficult
to be sure that comments made continue to be relevant, since they
may refer to practices and structures that have been superseded.
2. CARE International UK has had dealings with
the European aid sector for many years. What follows are reflections
on that experience. We have tried to distinguish between issues
of a policy nature, and more operational matters related to aid
administration. As will become evident, there is a strong overlap
between the two, and so the distinction is not exact.
3. The comments that follow reflect issues that
have arisen from specific experience with the European Commission
through both CARE UK and CARE branches elsewhere in Europe. While
certain inferences made are likely also to apply to the probable
position of other non-governmental organisations (NGOs), they
make no claim to being either exhaustive or representative.
POLICY CONSIDERATIONS
4. It would be easy to focus on problems and
frustrations encountered in relationships with EC institutions.
It should be noted that overall we consider the EC to be a valuable
and at times enlightened donor that has allowed CARE International
UK to launch some pioneering development initiatives as well as
timely humanitarian interventions.
5. We would support maintenance of the size
of the European aid budget. We are, however, concerned that the
potential of the EC development budget to bring real benefits
to the poor is being restricted by certain observable trends,
including
— an increasing emphasis on large scale
capital projects, which do not necessarily have a poverty focus;
— a growing proportion of funds going
to middle income countries, particularly in Eastern Europe, at
the expense of poorer countries (for example, the proportion of
aid to the African Caribbean and Pacific (ACP) countries fell
from 46 per cent in 1992 to 15 per cent in 1997);
— a large proportion of funding is
through bilateral agreements negotiated at government level with
no mechanisms for incorporation of wider societal views and concerns.
6. These trends run counter to UK government
thinking on:
— poverty alleviation, as expressed
in the 1997 White Paper on International Development—"Eliminating
World Poverty";
— civil society involvement, discussed
in the 1998 Consultation Paper "Strengthening DFID's Support
for Civil Society".
and we would welcome measures to ensure greater harmony
between EC and UK policy.
7. One of the most disturbing policy changes
that is being proposed by the Commission is consolidation of
budget lines under geographic bilateral budgets. It is not
clear at this stage whether this decision has been taken for policy
or for reasons of operational expediency. What is certain is that
it has implications at both levels.
8. Many governments are antithetical to externally
supported social interventions in general, and NGO activities
in particular. If all development aid between the EU and other
countries becomes subject to bilateral agreement, there is a danger
that controversial or pioneering initiatives will get excluded.
9. This would remove the power of the European
Parliament to allocate funds to pursue goals that may be in the
wider interest. It also arguably limits the effectiveness of the
EU development programme by making certain strategic interventions
hostage to bilateral negotiations.
10. This change would have several implications
for NGOs such as CARE International:
11. Extinction of special budget lines
Many lines of funding which were previously
used by NGOs would now be removed. Aside from the political issue
of whether the will of the European Parliament (expressed in the
creation of these budget lines) is sufficiently represented in
this new arrangement, there is the pragmatic concern about whether
specific issues will receive the necessary priority when subsumed
into a larger whole, dealt with by non-specialist staff.
12. Accessibility of bilateral lines
Most NGOs will have difficulty in making use
of bilateral budget lines. CARE International is one of the very
few NGOs that have achieved this, and our experience is that it
is a lengthy and time-consuming process. There are no set procedures
and established criteria for decision-making that NGOs (or even
EC desk officers) can understand and therefore prepare for. Negotiation
times run into years and very few NGOs will be able to sustain
this momentum, much less plan for it.
13. Increasing grant sizes
Bilateral lines tend to deal with large scale
budgets, beyond the scale of most NGO interventions. Small grants
can take as much effort to manage as large ones, and over-worked
desks will understandably give priority to initiatives of a scale
that have a greater impact on their expenditure targets.
14. Consequently, CARE International views with
some concern the extinction of the EU special budget lines. While
it may be administratively more efficient to do so, the fact that
it is through the support of these lines that development NGOs
are able to be most effective.
OPERATIONAL ISSUES
15. Problems encountered by CARE International
in the past have been varied, depending on circumstances, but
can be summarised into:
16. Late payments
Payments due from the EC for implementation
of contracted work are commonly late in arriving. We are aware
that this has prejudiced the very survival of smaller NGOs. CARE
International has been able to establish an internal loan fund
facility to tide projects over these cash flow delays. However
this incurs a cost of capital in the form of interest charges
which are not recoverable from the EC.
17. This is despite clauses which allow interest
to be charged for payments later than ninety days after approval
of interim reports. In practice,
— most projects cannot easily survive
ninety days with no cash;
— there is no contractual provision
for delays in reading submitted reports, so the ninety days may
not start for several weeks after report submission;
— most agencies are loath to charge
interest incurred for fear of antagonising EC officers and loosing
goodwill for future grant requests.
18. Restrictive overhead ceilings
In many instances the ceilings on overheads
that can be charged do not cover actual project implementation
costs, in terms of project management and administration. For
example, in European Community Humanitarian Office (ECHO) contracts
administration is charged pro rata on volume of procurement; in
contracts with a low procurement element the amount available
for administration can be as low as 0.1 per cent of total contract
value. This is admittedly an extreme (but real) example. The new
Framework Partnership Agreement with ECHO codifies administration
charges at a higher level than this, but still does not compensate
NGOs adequately for their work. The general impression is that
there appears to be little appreciation that EU contracts have
demanding monitoring and reporting requirements which can only
be met at a cost.
19. Furthermore there is a perception that there
is a degree of inconsistency in relation to the charging of overhead
costs by NGOs and private consultancy firms. While there is increasingly
strict scrutiny of NGO overheads, a similar level of stringency
does not appear to cover consultancy rates for work of the same
nature.
20. Mixing of political and humanitarian developmental
agendas
We have noted a tendency for decisions on funding
to be increasingly influenced by political considerations. It
is to a certain extent inevitable that member countries will wish
to send political signals through their aid allocations, making
the intrinsic developmental value of the proposal in question
a secondary consideration. This makes for a certain volatility
in grant approval which can make programme planning difficult.
21. Whether this is for political or other reasons,
in the case of ECHO in particular there are increasing conditionalities
in the disbursement of aid, constraining on NGO's independence
of action. A particular case in point is ECHO reserving the right
to suspend funding (and therefore NGO operations) on grounds of
security. The fact that the security argument was invoked unilaterally
in the case of Afghanistan, for example, compromises the relationship
of mutual trust and confidence between donor and NGO which is
necessary for an effective humanitarian response.
22. Rigid distinction between emergencies and
development
Certain countries such as Afghanistan and Sudan
are eligible for funding only of an emergency nature, which is
invariably short-term. In reality, most emergencies are now complex,
having neither rapid onset nor a finite conclusion. There is a
need for a funding mechanism that recognises the nature of long-duration
emergency situations. To a certain extent, the creation of the
Rehabilitation special budget line addressed this problem, but
in practice its application has been restricted and accessing
the funds fraught with difficulty for various reasons (not least
of which has been the absence of clear guidelines).
23. Lack of clarity in decision-making processes
and powers
The principal issue in this regard is the relationship
between the Delegations in the various countries and the Commission
in Brussels. There is ample anecdotal evidence that the ambiguity
on the division of authority between the two levels is deliberately
cultivated in order to evade responsibility for delays or inaction.
The consequence is that in many cases NGOs simply do not know
where they stand in a given decision-making process.
Prospects
24. Looking to the future, the current changes
that seem to be afoot within the EC look likely to exacerbate
rather than resolve the problems encountered in the past. Our
understanding are that the major changes being implemented are:
25. Establishment of central administration body
that will handle all contracts after approval (SCR—one point
also known as SCOOP).
Obviously it is early days to judge the effectiveness
of this change but early signs do not bode well. The transition
appears to have been disordered. More ominously, there is a lack
of correspondence between the structures in the development Directorates
General (DGs I & VIII) and the SCR. This will mean a certain
confusion in the flow of responsibilities between the desk officers
and the contract administrators which may generate problems when
it comes to project implementation and monitoring.
26. Larger minimum grant thresholds
If the consolidation into bilateral budget lines
does go ahead, NGOs will be required to submit larger proposals
as consortia. CARE International has had experience of this, from
which several unresolved issues can be highlighted:
— who pays the cost of integrating
the proposal? i.e. before the programme funds are assured, the
programme identification and design costs significantly increase
as the multiplicity of stakeholders increases;
— what mechanisms exists for appraisal
of the programme? How will the EC avoid having to assess each
of the individual partners separately?
— who is responsible for reporting
on the consolidated programme, and therefore undertakes the overall
programme management? i.e. will the EC accept one interloculator
for the whole programme, and to what extent will it hold this
single contractor responsible for the performance of the other
partners.
27. It is recognised that the root of many of
these difficulties is workload of the development administration
units in Brussels. Whilst not advocating an overall increase in
the staffing of the Commission, there appears to be prima facie
evidence that a review of the administrative burden of certain
departments needs to be done.
28. In summary, these foreseen changes are likely
to:
— increase delays in payments and other
stages of contract administration within the EC;
— perpetuate inequity in the apportionment
of NGO administrative costs, at a time when demands on their management
and its associated costs are likely to increase;
— permit greater political interference
in decision making processes as bilateral relations become a more
important factor in the management of budget lines.
CONCLUSION
29. The EC is a large aid donor with the potential
to achieve a great impact on development. As such, its aid budget
should in principle be defended.
30. However, there is some preoccupation that
current trends in the policy and operational arenas are leading
the budget in a direction which will reduce its effectiveness
as measured by UK development policy priorities.
31. Some of our concerns relate to our own operational
position as a development and relief NGO. However, we also have
deeper concerns regarding the effect that operational obstacles
will have on the impact of EC aid on poverty and the development
of civil society. These concerns would apply whatever channel
is used for the delivery of this aid, be it via NGOs or otherwise.
32. To address these there is a need for mechanisms
which achieve:
— bottom-up expression of aid priorities
in bilateral programmes;
— decentralised structures staffed
by people knowledgeable in their country or sector;
— transparent, clear and harmonised
procedures;
— consistent policies across geographical
and sectoral departments.
33. We urge the UK government to adopt an approach
of constructive engagement, maintaining the EU aid budget and
simultaneously contributing to the review of its policies, priorities
and procedures.
CARE International UK
October 1998
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