Achieving Value for Money

Guide to Financial Management

Achieving Value for Money

NGOs and donors aim to make the maximum possible impact with the least possible money.  Resources are limited, so every dollar has to add value.

Measuring value for money is a tough area, with no easy answers. Hopefully the following notes may help managers, trustees and donors consider the issues.

Value for money failure

NGOs can spend a lot of money working very hard to do activities that achieve very little to solve social problems.  It's sometimes called 'buying air'. To understand why, we need to take a look at development methodology.

How development works

Understand problem, choose strategies,<br />
implement activies, solve problem

Wouldn't it be wonderful if it were this simple?  But development is too complex! 

So instead of this neat but unrealistic linear process, we build in a learning loop.

 

 

 

Monitoring and evaluation - key to learning?

Development<br />
cycle

Carrying out 'monitoring and evaluation' (M&E) enables NGOs to find out whether the problems have in fact been solved, and if not, why not.

But this is old news! M&E has gone a long way to improve the effectiveness of NGOs, but we often still find it hard to get the analysis right, choose the right strategies and implement them in such a way as to create social change.

Achieving the planned outputs (eg training 100 micro entrepreneurs) doesn't always result in desired outcomes (eg increasing household incomes). 

Doing the right thing or doing the thing right?

Because of practical problems in accountability, it is very difficult to assess whether activity A has more or less impact than activity B.  The 'right thing to do' is not obvious.

What is most critical in achieving impact is that each of the steps in the above cycle are carried out in the right way - by respectful dialogue with beneficiaries.  That is 'doing the thing right'.

'It ain't what you do, it's the way that you do it, and that's what gets results' - Bananarama song lyrics

Allocating resources

When allocating resources, (whether you are a donor deciding which proposals to fund, or an NGO deciding which activities to carry out), instead of (or as well as) pouring over logframes and 3 year financial projections, try these criteria to achieve real value for money.

  • Does the NGO provide evidence of respectful dialogue with beneficiaries at every step?
  • Do they invest in the recruitment and development of high quality field staff who can engage with beneficiaries?
  • Are there adequate internal controls to ensure the creation and revision of budgets, authorisation of spending and safeguarding of assets?

 


 

Case study - Resource Allocation by the UK's Major Humanitarian Agencies - a case study, from an independent evaluation of work in Southern Africa, 2002 - 03.
 

 Tips on effective project level monitoring and evaluation. www.mande.co.uk

 

See the section in the Guide called 'A new management agenda', which explores these issues in more depth.