Balancing risk case study - NZAID and innovation when working with NGOs

Government often funds NGOs to provide local services because they are innovative and relatively non-bureaucratic. It is cautious about imposing controls or excessive monitoring that could block innovation and creativity.

NZAID is responsible for managing New Zealand’s assistance to developing countries. It is unique in that it funds international projects.

The primary mechanism for supporting the work of New Zealand NGOs who are working with overseas partners is the Kaihono hei Oranga Hapori o te Ao – Partnerships for International Community Development (KOHA-PICD)

Read more about NZAID’s funding relationship with NGOs:

Because there is a greater chance of project failure when working with poor and marginalised people, it may be necessary to take risks. NZAID's KOHA-PICD policies explicitly state that failure arising from a calculated risk will not necessarily mean the end of funding. NZAID believes this is important if the funding process is to encourage innovation and creativity.

NZAID funds overseas partners in situations that can change quickly. Severe, unexpected changes in context may turn a normal project into a high-risk venture. For example, New Zealand NGOs may have problems with access to information or reporting from their partners. At such times it is important for New Zealand NGOs to maintain their relationships and to be seen to stand in solidarity.

The KOHA-PICD policy provides the flexibility to maintain such relationships. New Zealand NGOs must keep the KOHA-PICD Programme Management Committee advised of any relevant developments. The majority of committee members are elected by New Zealand development NGOs. The committee assesses project applications and recommends which projects should be funded.

• Political, social, economic or environmental threats at an exceptionally high or chronic level.
• The partner is a community-based organisation, with no or low ability to communicate in English.
• The partner is not an established NGO and knows little about the presentation of proposals and reports.
• The project is risky in itself but still worth trying. For example, it might be challenging a traditional power structure, working with extremely marginalised communities, or attempting some innovative but untried forms of income generation.
• The project site is very remote or very dangerous, making communication between the New Zealand NGO and the partner difficult, and frequent monitoring visits unlikely or impossible. The partner has limited skills in budget management.

Guidelines for the New Zealand NGO.

• Identify the risk factors.
• Discuss risk factors with the partner and seek their ideas on how they will manage their risks.
• Ensure that, despite the risks, the project does fit the KOHA-PICD criteria.
• Develop a specific appraisal and monitoring plan for the project. For example, the New Zealand NGO may visit before funding, and then every two years, unless terrain or context makes this impossible.
• Seek support from other partners in the area who may be willing to act as mentor for a new group.
• Consider what additional support or training the New Zealand NGO might be able to offer the partner. Examples might be paying for support or arranging for some training from a neighbouring NGO.
• Take the risk!

The following steps to address risks must be negotiated with the KOHA-PICD Programme Management Committee.

• Take whatever steps are possible or appropriate from the managing project risks list (above).
• Discuss the proposed funding with the committee, explaining why the New Zealand NGO and its partner want to proceed and how the New Zealand NGO plans to manage the risks.
• Be clear with the committee that, despite all care, the project may fail and/or the New Zealand NGO may not be able to report on it regularly or adequately.
• Agree the timeframe over which funding will be supplied.
• Agree with the committee that if the project fails, funds will not need to be returned.
• Agree how to keep the committee informed.
• The full possibilities of the KOHA-PICD will be diminished if agencies are afraid to use it for innovative, different, or risky projects. New Zealand NGOs need to find ways to fund high-risk projects and yet be confident about using KOHA-PICD co-funding. They also need guidelines so they can make good judgments about risky projects.

In 2008, the Auditor-General's office carried out a performance audit to examine the effectiveness of NZAID’s management of overseas aid programmes. The audit focused on how NZAID planned, implemented, monitored, and evaluated its overseas aid programmes. It specifically looked at how NZAID managed three programmes - the Papua New Guinea bilateral programme, the Indonesia bilateral programme, and the Pacific Regional Health programme.