Value for Money and Civil Society

1. Civil Society Department February 2011 Value for Money and Civil Society

2. Two questions posed by Bond: • What does DFID want CSOs to do on VFM? • What is DFID’s policy on VFM for CSOs?

3. What does DFID want to see CSOs doing on VFM? …..shared agenda, we want civil society organisations to be as effective as they can be in eradicating poverty.. …..same agenda for all organisations – multilaterals, governments etc Putting effectiveness at the heart of a CSO’s work: • Having a clear vision • Being clear about results • Having sound, evolving partnerships • Being well governed and having strong organisational processes • Maximising value in everything an organisation does

4. Less about: Isolated used of methods or approaches eg SROI, DALYs, CBAs Analysis delinked from organisational processes Applying a VFM recipe book or step by step guidance VFM as an add on, discrete process or activity Blanket application of formulas and ratios More about Organisation-wide thinking Justifying your approach in your specific context Identifying options and prioritising areas for maximising value Continual commitment to learning and improving Piloting and monitoring Showing evidence and feedback loops Being practical What does DFID want to see CSOs doing on VFM? Cont.

5. Myths about Value For Money • It’s a race to the bottom – it’s not about what’s cheapest (eg use of volunteers) • It hinders innovation and risk taking – should make risks and assumptions explicit as part of the theory of change, but also the potential opportunities for scaling up/wider application • It encourages easy-to-measure programming choices – if the results chain is sound, should not drive particular sectors or projects further down the results chain.

6. What is DFID’s policy on VFM in its funding of NGOs? • NAO: optimal use of resources to get desired outcomes • Proposals need to explain in what ways funding will offer the maximum benefit for the resources requested. • Consider and cost different options. • All funding applications are scrutinized for VFM in terms of administrative and programme funding – this is not new. • VFM considerations are part of funding decisions, but what is key is a sound proposal. “If a project/programme has been well thought through, then it is more likely to be scored highly in terms of value for money” • Consistency - the budget, logframe and proposal need to tell a coherent story of change

7. Ways to think about VFM: • Be practical. Value for money is part of the overall assessment and can not be de-linked from other aspects of the assessment eg design, rationale • Give sufficient information to assess VFM eg unit costs, costs per participant/trainee, cost effectiveness or rate of return, other options considered. • Work through the programme with partners – VFM applies to all organisations receiving funding. • Justify why the approach has been chosen in terms of providing the best value given the time and resources spent, the type of spend. • Provide clear analysis of what VFM means for you eg type of organisation or spend, position on the results chain, geog spread • Explain the nature of the project and the context as it relates to VFM – what are the real costs of ‘doing business’? eg harder to reach groups/areas, security concerns etc • Demonstrate the institutional systems in place to assess/monitor VFM • Have strong results focus – VFM flows from that.

8. How can CSOs demonstrate value… • Monetizing eg costs per beneficiary, unit costs and compare with industry/local standards where available. Extrapolate sensibly. • Benchmarking Compare your costs against other CSO/govt/private sector provider and show how costs and benefits vary • Showing efficiencies: % costs on activities compared to running cost, where budgets are being spent, staff based, outreach approaches etc

9. Questions we ask of proposals…and of ourselves! • Are there recent examples to show how CSOs ensure value for money in their work? • Is there evidence to show that CSOs think about cost effectiveness in decision making and resource allocation? • Is funding performance based within the organisation? • Have CSOs used any comparators (either internal or external) to highlight value for money? • Are robust monitoring and evaluation systems in place?

10. More questions…(continued) • Is there evidence to show that CSOs are continually looking to improve value for money? • How does the organisation control administrative costs? • Is there evidence that the organisation achieves economy in purchase of inputs? • Are robust financial management, accountability and auditing arrangements in place?

11. Conclusions • Joint learning process – DFID doesn’t have the answers. But DFID is keen to share knowledge and lessons • Continual improvement rather than a hurdle to jump over • Should reinforce poverty and results focus, and enhance effective partnerships • It’s building an organisational culture of VFM, with partners too. • Trail blazing - much innovation and leadership in civil society

12. Leading the UK government’s fight against world poverty LONDON 1 Palace Street London SW1E 5HE EAST KILBRIDE Abercrombie House Eaglesham Road East Kilbride Glasgow G75 8EA Tel: +44 (0) 20 7023 0000 Fax: +44 (0) 20 7023 0016 Website: www.dfid.gov.uk E-mail: enquiry@dfid.gov.uk Public Enquiry Point: 0845 300 4100 If calling from abroad: +44 1355 84 3132