An Outcomes-Based Funding Approach

The Kamvalethu Foundation has been on an 18-month journey where they have moved over to outcomes-based funding. Project Manager Lauren McGill shares on the process. Our application process has four stages: 1. Screening process to collect basic information. It’s a basic 2-pager that people fill in. 2. Applicants are invited to complete the second application form. This is a very comprehensive review of the organization and the project. It requires detailed information on the board, finances, Theory of Change, operations as well as a basic monitoring and evaluation plan. We also explore the reputation of the organization within the community as well as community involvement. We also share our approach and answer any questions here. 3. Face-to-face visits and site visits. By this point we already have a good idea if we are going to be a good fit or not. 4. Memorandum of Understanding (MOU) as well as a full project plan (project schedule, communication plan; risk management plan; monitoring and evaluation plan) will be drawn up and discussed collaboratively. Two to three outcomes will be decided on. The aim is to refine it down to the most important outcomes the programme is seeking to achieve. Kamvalethu funds annually and we fund up front on outcomes. So we would decide, collaboratively with our project partners what their outcomes are. This is an iterative process until we get to a place where we both agree what the outcomes are. There are very few – we try to land on two or three.We try to cut through the noise – i.e. it is good to measure attendance at school, but that is basic monitoring. What we are really looking to achieve is “children who are school ready”. So that’s the kind of outcome we would be looking for. FundingOur funding is done in two tranches: Tranche 1 – Half of the financial commitment is transferred on signing the MOU. Tranche 2 – Halfway through the partnership, upon receipt of the report, the second half of the funding is released. (It is quite a simple report, really just on how the outcomes are going and that they are on track to being achieved). Bonus at the end – there is a small bonus if outcomes are exceeded. Funding is dependent upon the extent to which they have achieved their outcomes. In other words, partly achieved outcomes may mean that the full budgeted tranche is not paid over. If you have achieved 85% of your outcomes, you receive 85% of the funding. It is important to note that these outcomes, albeit negotiated, are largely determined by the projects, and so the incentive to fulfil them should be high. The board will take extenuating circumstances into account and may decide to grant the full tranche even where the outcome has not been fully met. Insights received from doing outcomes-based funding:– Collaboration: lots of people talk about partnership and collaboration, but I have seen very few actually practising these buzz words! Power dynamics are real. We fundamentally believe that the projects with whom we partner must be the experts in implementation, and our role is to come alongside such organisations to achieve the outcomes. – Change: It can be difficult for some NPOs to change how things have always been done and this does require a step up in monitoring, so if they have not been doing much of this it can feel onerous to begin with. Starting something new is always a little messy. – Data systems: we are in the process of figuring out our data systems. We would like these to be more robust to improve our feedback loops and enable more data-driven decision making. – Capacity building: Theory of Change, data systems, training… be open to what your project partners need beyond finances to become a thriving organization. – Trust: you do sometimes worry that outcomes can be fudged – trust and accountability are essential. The funding is unrestricted as long as the outcomes are met. If they feel they need training, teambuilding or equipment, that is up to them to decide. Principles to keep in mind:– Clear communication: complete your due diligence, have every conceivable awkward conversation up front, ensure common language and have an extremely comprehensive MOU. – Start with the end in mind: choose only 2 – 3 outcomes which cut through the noise and get to the crux of what you are trying to achieve. Be realistic! – Collaboration: recognize the partnership and allow your project partner to lead where possible. – Data collection: track the historic, baseline and ongoing data to ‘turn the curve’. Project partners take the lead in monitoring their own projects. – Capacity building: assist your partners in building their capacity (tools, strategies, sub-outcomes etc.) The feedback from our partners is that funding was “easier” before we moved to outcomes-based funding because funding was released but then the report was often forgotten about. They have said though that this method has made them update their systems to ensure they can regularly check that they are on track to achieve outcomes. The Kamvalethu Foundation enables businesses to positively impact the lives of previously disadvantaged children in
South Africa through education.