Introduction

Unlike previous United Nations reforms, the current reform of the UN development system (UNDS) squarely addresses the imperative of changing how the UNDS is funded in order to ensure it can respond robustly and predictably to countries’ Sustainable Development Goal (SDG) priorities without compromising the multilateral nature of UN support.¹ Through the Funding Compact welcomed in 2019, both Member States and the UNDS recognised the necessity of addressing the sharp imbalance between core and non-core resources. Moreover, there was clear acknowledgement of the need to change funding behaviour, and especially to improve the quality of funding, if the UN is to deliver better results against the ambitious 2030 Agenda.

A 2021 Multilateral Organisation Performance Assessment Network (MOPAN) analytical study on UNDS reform found agreeing to the Funding Compact itself a notable achievement, with all parties recognising the need for mutual accountability and a transformation of financing to achieve the SDGs.² Meanwhile, the Dag Hammarskjöld Foundation’s 2021 report, ‘The Way Forward: Fulfilling the Potential of the Funding Compact at the Country Level’, based on a wide number of country consultations with key stakeholders, found that excessive earmarking and fragmentation remain key challenges.³

For their part, UN agencies have to date been making very good progress in transparency, visibility, reporting and efficiency.⁴ Meanwhile, the positive momentum shown by the UNDS has continued, with recently released data (based on 2020 actual expenditures) showing that of the 36 indicators under the UN Sustainable Development Group (UNSDG)’s 14 Funding Compact commitments, 53% (19 indicators) have already been met or seen rapid progress, 33% (12) have seen medium progress, and only 11% (4) have seen stalled or slow progress, with one indicator showing no data as yet.⁵ Importantly, progress has been made in some of the qualitative aspects of Funding Compact commitments, such as programme country governments reporting improved focus on common results among UNSDG entities at the country level.

On the Member State side, there has also been important progress, with the doubling of the share of pooled funding already achieved in advance of the aimed-for target of 2023. The 11.7% of non-core funding for development activities that now goes via pooled funding represents a big jump from the 2017 baseline of 5%. Overall contributions to development- related inter-agency funds totalled US$ 1.5 billion in 2020, an increase of 29% over 2019 and 178% higher than in 2015.⁶ Though the Peace Building Fund and the Joint SDG Fund remain short of targeted contribution levels, contributions to global and regional pooled funds were 72% higher in 2020 than in 2019, while contributions to country-level pooled funds, used to accelerate joint action agreed in UN Cooperation Frameworks, increased by 11% in 2020 compared to 2019.

That said, the same set of Funding Compact data shows that of the 17 indicators under Member States’ eight commitments, only 12% (2 indicators) have been met or seen rapid progress, 35% (6) have seen medium progress, and 47% (8) have been stalled or slow progress, with one indicator showing no data as yet.⁷ Overall, this tallies to progress on 86% of UNSDG commitments in the last year, compared to just 47% for Member States.⁸

Of particular concern is the current direction of travel, with the latest indicators showing a decline in the core share of voluntary funding for development-related activities from the 19.4% baseline in 2017 to just 17.2% in 2020 – a far cry from the 2023 target of 30%. The same core indicator including assessed contributions also fell from the 2017 baseline of 27% to 26.9% in 2020. While this data only accounts for the first full year of the Funding Compact (2020), subsequent agency-specific data shows that progress on the Compact’s main funding indicators remains slower than anticipated, and is yet to lead to the better-quality, predictable funding of the UNDS that can help deliver demonstrable results at scale.

What is to be done?

The continued decline in the share of core/regular funding not only undermines the multilateral character of the UN’s support but hampers the organisation’s ability to rapidly address critical needs, whether this be the COVID-19 pandemic or the food, fuel and finance crises resulting from the conflict in Ukraine. It also weakens the UNDS’s leadership role in helping countries get back on track towards the SDGs and stimulating accelerated action on climate change. Given these funding trends are likely to decline further over the course of 2022 due to huge shifts towards humanitarian support, the diversion of overseas development assistance to pay for the domestic hosting of Ukrainian refugees, and a very challenging fiscal situation, the following question arises: What is to be done?

Although completed before the conflict in Ukraine and current macroeconomic pressures, both the MOPAN analytical study and the Dag Hammarskjöld Foundation’s 2021 report recommend similar courses
of action: 1) accelerating Member States’ progress on Funding Compact commitments by translating them into individual country actions and articulating what they can and cannot deliver in practice, thereby adding tangibility for Member State officials and helping strengthen transparency and accountability, including by enabling Member States to better hold one another to account; 2) building ownership and understanding of Funding Compact commitments at every level of Member State administrations – including line ministries and in-country officials; and 3) all UNDS stakeholders using financing mechanisms to their best effect.⁹

In addition, are there not lessons from six years of experience with the humanitarian community’s equivalent to the Funding Compact – the ‘Grand Bargain’ – that can similarly be applied? And is there not more the UNDS itself can do to facilitate greater Member State awareness of the Funding Compact at the country level, as well as drive more integrated approaches in which higher-quality funding is just one, albeit important, key factor?

Possible lessons from the ‘Grand Bargain’

At the 2016 World Humanitarian Summit held in Istanbul, a ‘Grand Bargain’ was agreed between 18 donor countries and 16 international humanitarian aid organisations – including UN agencies, the Red Cross/ Red Crescent Movement and other international non- governmental organisations – to improve the efficiency and effectiveness of international humanitarian aid. The 51 commitments made ranged from agreeing to publish open data about money flows to saving costs by procuring goods in bulk. Some of the many targets were missed, while others, such as cash-based assistance, have been achieved.

Instituting an annual, or biannual, independent review

An important differentiating feature of the Grand Bargain is that its voluntary annual reporting mechanism is supported by an annual independent review, in order to monitor implementation of commitments. The most recent of these reviews (2021) had a double remit: to analyse the progress achieved and challenges faced during 2020; and to review the progress made since the establishment of the Grand Bargain in 2016.

While not perfect, the combination of self-assessment and external public independent review has proven effective in holding (some) signatories to account for their commitments, requiring them to demonstrate the results they are achieving individually and assessing what this means in terms of system-wide progress.¹⁰ Instituting an annual, or biannual, independent review of Funding Compact progress, perhaps conducted by the new UN system-wide evaluation capacity in concert with MOPAN, and then discussing its analysis and recommendations with Member States at the Economic and Social Council’s annual Operational Activities Segment, could be a much-needed instrument at this critical stage.

Raising the political engagement

As is the case with development funding and the Funding Compact, many of the longstanding obstacles the Grand Bargain was created to address were political in nature. As the latest independent annual review of the Grand Bargain by the Overseas Development Institute puts it: ‘These are political actors, making political decisions. Political tactics are thus required to unblock the remaining challenges to change and forge appropriate compromises.’¹¹

As such, a new set-up was proposed for the Grand Bargain, elevating the technical workstreams into a more political arena, and strengthening local actor engagement in negotiations. Political caucuses, or ‘coalitions of the willing’ consisting of high-level, self- appointed ‘champions’, are expected to work together to address some of the toughest barriers to change.¹² While one or two key donor countries have at different times assumed an informal ‘championing’ role for the Funding Compact, to the furthest extent possible this role should be formalised at a senior political level, and on a rotating basis, enabling more high-level political follow-up of Funding Compact commitments.

Significantly simplifying the number of commitments

Like the Funding Compact, one of the key objectives of the Grand Bargain is to secure better-quality funding to support more efficient and effective operations. This key objective has at times struggled to garner momentum – although increasing numbers of humanitarian donors report having met the 30% target for provision of flexible funding, there has not yet been a substantive system-wide shift in the funding landscape.

Perhaps equally key was the realisation that having such an overwhelming number of commitments within the Grand Bargain had become a distraction to moving the needle on what really matters. Building on consultations among the wider group of signatories, in 2021 the Eminent Person and the Facilitation Group of Ministers and Principals agreed on a revised ‘Grand Bargain 2.0’ for a period of two years to mid-2023.¹³

The Grand Bargain’s overall objective was subsequently reframed to ensure ‘better humanitarian outcomes for affected populations through enhanced efficiency, effectiveness and greater accountability’. This was complemented by just two new enabling priorities: better-quality funding and improved support to local responders, with increased engagement of affected populations. While concern has been expressed over a number of the original commitments disappearing, many see such prioritisation as tightening the agenda. It may also improve accountability – with so many commitments, agencies and donors tended to cherry pick the issues they wanted to focus on, to the detriment of others.¹⁴

This seems a very applicable lesson for the Funding Compact, which would be well advised to simplify its 22 commitments (and 53 indicators) down to those that will really make a difference, such as: increasing voluntary, and assessed, core commitments for the UNDS; providing more predictable funding; expanding the donor/contributor base (in 2020, 34% of all development-related funding to the UN came from just five countries – the United States, Germany, Sweden, the United Kingdom and Japan); fully funding the UN Resident Coordinator system; ensuring clear funding frameworks for each UN Cooperation Framework; and enhancing efficiency gains across the UNDS.

Making the Funding Compact relevant at the country level

There is, as the MOPAN analytical study puts it, ‘a disconnect between what MS [Member States] commit to at the global level and the extent to which they have ownership or demonstrate buy-in to the reform process at a country-level’.¹⁵ As highlighted in ‘The Way Forward’ and 2021’s Financing the UN Development System report, Member States need to better translate their global commitments to the Funding Compact into concrete country-level commitments to the UNDS.¹⁶ Similarly, Resident Coordinators and UN country teams should engage in strategic dialogues with Member States on how to operationalise the Funding Compact at a country level and co-create strategies for more effective country-level development cooperation.

Some interviewees in the MOPAN study also argued that in cases where pooled funds may be an enabler of coordination, the main impetus for joint work should come from other sources: the UN Cooperation Framework itself, a clear division of labour, and a shared experience of how to respond to country needs. Hence, in addition to proactively socialising Funding Compact goals with partners as part of country-based strategic funding dialogues, it is important that recent momentum towards more integrated UN approaches is sustained.

The first three years of UNDS reform saw great effort expended in developing new tools such as the UN Sustainable Development Cooperation Framework (CF). Intended to be more binding and relevant than previous frameworks, the CF is now embedded in a comprehensive analysis, planning and implementation cycle that should help country teams better develop and advise on integrated policies for tackling change in complex systems.¹⁷ Overall, such reinvigorated tools place greater focus on gender equality, human rights and the principle of leaving no one behind, which has become the leitmotif for UN support to the SDGs.

In addition, the UN’s COVID-19 pandemic response has demonstrated that there is considerable value in joined-up approaches developed around clear objectives, with greater attention paid to the provision of quality policy advice. In this regard, the robust global UN framework developed by the UN Development Programme and the Development Coordination Office has become a useful template for national socioeconomic response plans.¹⁸ As countries emerge from the pandemic and the current food, fuel and finance crises, it is essential that all relevant instruments are adjusted to drive an inclusive and sustainable recovery aimed at accelerating SDG implementation.

Moreover, while the new CF process in countries covered by the recent UN Office of Internal Oversight Services (OIOS) evaluation appears to have better enabled policy advice, this is not yet systematic.¹⁹ It is therefore vital that the next phase of reform – operationalising coordinated and integrated delivery of policy advice and programmes – results in change across UN entities. The OIOS evaluation found that outcomes were hindered by a number of factors, including disparate agency planning processes, authorities and reporting lines that often favoured UN agency priorities over CF priorities. Funding competition, donor earmarking and bilateral funding arrangements have also undermined coherence.

Another key challenge is SDG integration – this is a particularly demanding and nascent field, where both the UN and other development organisations are struggling to show progress.²⁰ Hence, it is perhaps unsurprising that a UN ‘systems approach’ with a greater role for integrated policy advice has in reality been more ad hoc than systematic and transformational.

Conclusion

While the jury is still very much out as to how successful the Funding Compact will be in improving how the UN is funded, it represents the first serious systemic attempt to change the quality of UNDS funding in over two decades. It is also a much-needed instrument for enhancing mutual accountability and a strategic framework for change. Hence, it is imperative that efforts are maximised to enhance awareness, political buy-in and effectiveness, including at the country level and, based on the experience of the Grand Bargain, Member States and the UNDS consider a number of adjustments to make the Funding Compact more focused and impactful. We may not get another chance.