Financial tracking and reporting: Data gaps and challenges

Reporting and definitions

According to data provided by donors and aid organisations, multi-year funding has grown since the agreement of the Grand Bargain, but progress is patchy. While both donors and aid organisations note an increase in the multi-year funding they provided and received, the size of the increase they report is notably different across the two groups.

The primary challenge in reporting predictable and flexible funding lies not in the technical functionalities of major financial tracking platforms and initiatives, but in the absence of a shared lexicon. Within single institutions, there may not yet exist definitions and classifications of multi-year funding. Across aid organisations, the terminology gap expands, leading not only to a lack of a common framework to report against, but also to divergent understandings of multi-year funding. This hinders the assessment of baselines and progress against corresponding commitments in the Grand Bargain.

Donors and aid organisations broadly converge in regarding contracts of a minimum of two years as the basis for longer-term investments. Guidance from the OECD ^[1] and the GHD ^[2] indicates a timeframe of at least two years for funding to be considered multi-year. However, this definition is not yet endorsed or used by all Grand Bargain signatories, nor by others in the wider humanitarian system.

The analysis of data flows provides an initial overview of current volumes of multi-year funding. However, the data is partial and therefore limits the potential to draw more comprehensive conclusions. DI gathered data from donors and aid organisations to reconcile the two perspectives. However, two factors prevent the matching of donors’ expenditure with aid organisations’ income:

• Different sample sizes: while donors provided aggregated data on their multi-year grants to all their partners, the survey only gathered primary data from 10 implementers.
• Aid organisations combine different income streams (public, private, humanitarian, non-humanitarian), but the survey data does not provide enough information on individual donor’s contributions to allow identification of specific grants.

In addition, donors and aid organisations often define multi-year funding differently. For example:

• Conditions in long-term contracts might trigger payments in subsequent years only if certain results were achieved, while funding amounts are sometimes to be renegotiated or subject to budgetary approval processes. In such cases, some donors regard the funding agreement as multi-year, given the duration of the contract. However, the receiving aid organisations often do not. They may consider future funding tranches as not yet fully secured and thereby not predictable enough to assume the risk of multi-year activities.
• Multi-year funding envelopes set aside in donor budgets for certain regions, crises or country contexts will often count as multi-year funding from the donors’ perspective. For aid organisations, the determining factor is whether the individual grant agreements emerging from these envelopes have a multi-year timeframe, which is not always the case.
• Cost- or no cost-extensions that bring the timeframe of a funding agreement to, for instance, over two years, might be regarded as multi-year funding by some donors. However, aid organisations would not share this view, as these extensions are often short-notice and therefore do not provide the predictability perceived as intrinsic to multi-year funding.

In terms of results, no common set of indicators has yet been developed or linked to existing ones to measure multi-year effectiveness. There is a need to share approaches on how to measure cumulative progress across years, and whether this requires a different set of indicators from traditional, shorter-term monitoring. Investments in learning and development are required to test existing hypotheses and enable trend analyses that better map the results of multi-year funded activities. There remains a clear demand for longitudinal evaluations of predictable funding to substantiate emerging evidence on its benefits ^[3] .

Collecting evidence for multi-year funding is hindered by a lack of clarity on what it is expected to achieve, within and beyond the Grand Bargain framework. To enable purposeful reporting, donors and implementers should further discuss key aspects:

• How and to what extent multi-year and unearmarked funding can travel down the transaction chain
• How to monitor individual versus collective results
• To what extent longer-term and traditionally non-humanitarian results should be financed from humanitarian funding, and which results are realistic within the scope of humanitarian programming
• How to balance responding to immediate versus anticipated humanitarian need with limited funding.

There is great demand for evidence, but current reporting practices are disjointed. Donors are accountable to their parliaments and require coherent narratives and attribution as to how their funds are spent. Aid organisations pool diverse income streams to optimise resource allocation, but this means they cannot always report across existing humanitarian versus non-humanitarian divisions, whether in relation to their income or their expenditure. Aid organisations’ internal systems may still be geared towards monitoring against traditional grant mechanisms and annual budget cycles. Additional and varied reporting requests (Agenda for Humanity, Grand Bargain self-reports, OCHA’s Financial Tracking Service (FTS), the International Aid Transparency Initiative (IATI) and others) are yet to be joined up and built into existing financial systems.

Financial tracking

Existing platforms have functionalities that enable the tracking of multi-year grants and levels of earmarking. The current reference document for different degrees of earmarking is the typology that was annexed to the Grand Bargain agreement in 2016. ^[4] As discussed above, a comparable point of reference for a definition of multi-year funding does not exist at the time of writing. This poses a challenge to reporting to interagency reporting platforms and extracting comparable multi-year funding data from them.

OCHA’s FTS introduced the earmarking typology from the Grand Bargain document to its platform in early 2019 and captures funding that spans multiple calendar years. At the time of writing, 83% of all funding commitments and disbursements reported to FTS for 2019 had information on their level of earmarking. This is important progress in terms of data availability, although additional data quality checks might be necessary. In terms of FTS data on multi-year funding, the “flow model” provides a practical solution to the problem of enabling reports on multi-year funds, while still providing a breakdown of the annual funding tranches. Multi-annual pledges (those that span more than one calendar year), commitments or disbursements can be reported with their annual breakdown. The latter are captured as “child flows” with annual funding amounts that can be linked back to the multi-year “parent flows” through a unique identifier. Double-counting is avoided by removing the amount in US dollars from the parent flow, given that the breakdown of that amount is already captured by year. Identifying the total amount of multi-year funding for a calendar year is then a two-step process:

• Isolate all of the multi-year “parent flows” by destination usage year, filtering for those that span across the year of interest.
• Identify and aggregate the corresponding “child flows” with funding amounts in the year of interest.

However, there are limitations to this process. One is due to a lack of reporting that makes use of this functionality. While several donors, as shown in this research, self-report as providing multi-year humanitarian funding, only Germany and Switzerland had reported a significant number of multi-year flows to FTS for 2019 at the time of writing. Further, there might be instances in which a funding flow is directed to a project or programme that lasts for 12 months or less, while spanning across two calendar years. The question is then whether in reporting, the funding amount would be broken down by calendar year, thereby seeming to be multi-year. Consultation would have to establish whether this is too special a case to skew the data, in terms of how it is reported and whether the funding volumes are significant. The same issue might also arise with cost-extensions, which could be reported as a new funding “child flow” for a subsequent calendar year, but which do not provide the predictability intended for multi-year funding.

The IATI Standard allows publishers to report by levels of earmarking and provides different ways to approximate multi-year funding. It is possible to publish the level of earmarking for individual transactions by specifying the aid type according to the earmarking typology in the Grand Bargain document. ^[5] In terms of multi-year funding, given the lack of a commonly agreed definition, there is currently no standardised way to publish this information to IATI.

One option for estimating volumes of multi-year funding is by identifying IATI activities that span multiple years and therefore represent multi-year programming. For activities with only one source of funding, it could then be assumed that the funding agreement matches the timeframe of the activity. Consequently, all transactions associated with that activity could be treated as multi-year funding. However, for large-scale activities with multiple sources of income, this assumption is likely to break down, as different funding streams with likely different conditions and timeframes are combined to sustain the multi-year programme. Further, this approach only works to estimate amounts of multi-year funding retrospectively, as transactions cannot be published for future dates. Such dates require a reporting element rarely used: planned disbursements. ^[6] This allows a future payment schedule for an activity to be published to IATI, providing evidence of a predictable funding stream. The planned disbursements should then match the initial funding commitment representing the total value of the contract. As the payment schedule progresses, each of the planned disbursements can then be reported as transactions when carried out. Using these different reporting elements together can indicate that multi-year funding is already committed, while providing a picture of past disbursements.

Two issues currently limit the use of IATI data in analysing multi-year humanitarian funding: the quality and quantity of data published by members, and the ease with which data can be accessed and viewed. Progress has been made on the first, through the Grand Bargain’s transparency commitment to publish humanitarian data to IATI. ^[7] However, to date, while the quality of publishing to IATI has improved, it varies greatly between IATI members. Collectively, members are not publishing data in a sufficiently timely, comprehensive and high-quality manner to provide a representative picture of the international humanitarian system and so enable effective analysis of multi-year humanitarian funding. A common approach to reporting multi-year funding, informed by a shared definition, would greatly improve IATI’s ability to provide evidence on multi-year funding and programming, as would more detailed, regular and comprehensive publishing of data by all Grand Bargain signatories. The current absence of tools or platforms with which to easily access IATI data limits its current utility in viewing multi-year funding data. However, this is an issue now being actively addressed by the Grand Bargain transparency workstream, with a series of prototype tools being developed to provide accessible views of IATI’s humanitarian data. ^[8]