The magical story of the creation of The Ukraine Local Pooled Fund
At the end of 2022, the Philanthropy team and network members took part in a study by the Disaster EmergencyCommittee (DEC) on "Ways to support and strengthen local humanitarian action in Ukraine". One of the challenges at that time was the low percentage of funding for local organizations (1% of the budget went to local organizations) and the difficult due diligence process. One of the recommendations from the study was to create a new fund available to Ukrainian organizations with simplified vetting procedures and flexible funding.
In the fall of 2023, we learned that a Ukraine Local Pooled Fund would be created. This would be a pilot project where a national organization would be selected through a tender process to become the local administrator of this pooled fund. After considering our strategy and opportunities, we decided to submit a proposal and try our hand at this role. We realized that the project was ambitious and would require a significant increase in the capacity of our organization. However, we did not anticipate the number of challenges we would face. Our idea was to prove in practice that localization is possible and to demonstrate the capacity of Ukrainian organizations to manage resources. Our organization was selected in the tender. We started the due diligence process: the due diligence process was a comprehensive assessment with roughly 30 pages of questions about the organization's processes and policies . The reason for such an extensive process was due to the eventual ambition of the programme and the level of funding it could distribute after the pilot phase has been realised. We understood our responsibilities and diligently described all our work. In December, we learned that we had passed the due diligence process and that there were a few clarifying questions, with which we continued to work on in January.
In the process of passing the due diligence, we learned more about the mechanisms for implementing the funding. The funding is for a DEC collective initiative and is a pilot programme and therefore must go directly to a DEC member charity. Start Network is a charity that was previously hosted by Save the Children UK, becoming an independent entity in 2019. However, their programmes are still hosted by Save the Children UK and all programme funding operates under a legal agreement held between Save the Children UK and Start Network. This agreement stipulates certain ways of working that we were not initially aware of and has added additional complexity to the process and has taken time for us to navigate legally.
Start Network however, has extensive experience creating Pooled Funds around the world, and were selected so they could help the Ukrainian administering organization set up the processes of issuing funding, develop the organizational structure of the fund as well as it’s capacity to manage funding.
Several stages of the project were planned:
●conducting a design workshop with the involvement of local organizations to develop mechanisms for issuing funding (the results of the workshop can be found here)
●search for a supplier to localize the due diligence system that Start Network uses in its work;
●the direct process of allocating funding to local organizations;
●collecting project conclusions and results to strengthen and extend the project.
We were excited about the perspective of working with Start Network, as the localization research and previous projects were interesting and understandable to us. It was also a significant strengthening of this project, as we had experience in regranting, particularly in the medical field, but had never managed a pooled fund before.
Also in December 2023, we familiarized ourselves with the timeline of the processes. There was an ambitious plan to launch funding in February 2024. Due to the fact that certain risks were not taken into account before launching the project, which worked out, as you may know, we did not launch funding in May 2024. So what happened?
- Two mechanisms for issuing funding, instead of one in the classic Start Network model
- Lack of Ukrainian providers on the market, a contractor with expected/requested requirements
- Different requirements for contracts and agreements
- Building internal capacity of the organization
At the time of the study, there was constant shelling and an urgent need for immediate measures to provide people with basic things: food, heat, clothing, and shelter. Therefore, it was assumed that the Ukraine Local Pooled Fund would work with emergency grants. But by the time the design workshop was held, the number of massive shelling had partly decreased and the demand for funding for humanitarian projects, psychological, medical, integration, and rehabilitation projects, had increased. After the workshop, it was decided that the pooled fund would implement two mechanisms for transferring funding, and accordingly, we began working in parallel to create and describe two mechanisms: prepare application and reporting forms, instructions, criteria, and evaluation processes.
Ukraine has had a strong and developing civil society for 30 years. The latest results of the civil society study can be found here. However, we have not interacted with the humanitarian system on such a large scale. We had programs for the development of democracy, ecology, culture, and others. Since 2014, several powerful Ukrainian humanitarian organizations have emerged to address the needs near the occupied region in eastern Ukraine. However, humanitarian capacities have not been developed among the wider public sector.
Accordingly, consulting in this area was not developing either. When we launched a tender to find a local organization that could localize the due diligence process for local organizations to Ukrainian requirements, we faced a lack of proposals that met the expected requirements due to certain bureaucratic difficulties.
Today, after a number of compromises on both sides, we are finalizing the process of selecting a contractor to carry out these works.
Due to the complicated financing system, we had to agree on a number of contracts that had to be coordinated with each other. This led to an increase in preparation time. Instead of one agreement, which is standard in working with a donor, we had to draft three separate agreements: We had to sign a membership agreement with Start Network to be able to receive funds and then sign an additional two granting agreements, one for the operational set-up of the fund and the other to cover the disbursement funding that would go to local organisations. The process of drafting three separate agreements takes a considerable amount of time. In addition, we could not accept all of the requirements, so we had to work with additional documents as annexes to the contracts. The frequent lack of harmonization of internal donor agreements with Ukrainian legislation complicates the process of cooperation.
Translation of contracts was also an unaccounted for item in time: in Ukraine, we have to submit contracts in Ukrainian to the bank so that they can credit funds to our account, which our partners were not aware of.
In parallel to all the processes described above, we received recommendations from the Start Network on how to build the organization's capacity and set up processes. Not all of the proposed forms could be implemented in Ukraine, for example, membership agreements that exist in the Start Network model cannot be implemented in the context of Ukrainian legislation. Therefore, after a series of discussions and consultations with lawyers, we were able to find an acceptable model.
The experience of establishing the fund was a challenge both for the rapid increase in capacity and for the organization to acquire new competencies unique to the Ukrainian NGO/humanitarian response market.
At the same time, the fund and funding mechanisms developed during the design session are necessary and expected for local organizations. We have drawn the following conclusions that will help improve the next phases of the project if donors are interested in developing this project. At the same time, we see the need and importance to continue working on the fund in Ukraine. Until the war is over, there will be a need for humanitarian response, rehabilitation and adaptation of people. After that, we will have to start the recovery process, which we are already starting in some regions. It is important to understand that organizing these processes takes a lot of time, but it still needs to be started. This is the only way we can provide stable support and assistance to the victims.
1.Build more realistic timelines for the start of the project and preparatory stages, taking into consideration the time for legal delays.
2.Project partners should be equally involved in project design.
3.Have an alternative plan in case processes are delayed and you can't influence them directly.
4.Establish transparent communication with all stakeholders, including clear expectations and opportunities.
5.Explore a wider range of opinions, views, and experiences in project implementation.
This phase was indeed an important learning stage in the development of the processes. It took 6 months of intensive work by two teams and many consultants from international and national organizations. Due to the limited duration of the project, we were not able to localize all the processes to the end, as changes in the internal processes of international organizations to accept more risks or a different system take a long time.
We have already started working on making the processes and future stages of the project more localized and taking into account the opinions of a wider range of stakeholders, in particular, we are committed to further simplification the verification systems of local organizations by cooperating with other national organizations and taking inspiration from the tiered system of the Start Network, including looking at the most effective operational set-up, due diligence and contracting at the local level. We have planned to hold a joint event with local, international organizations and donors to present the main mistakes and achievements of the project and improve processes based on sincere feedback.