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Aid Modalities Guideline

Section B | Aid Modalities

Summary of NZAID Aid Modalities

An aid modality is: the high level approach agreed between the partners to a development activity, indicating its general scope and where the governance, leadership, and facilitation reside.  Aid Modalities are chosen based on an assessment of the desired scope and relationships, as well as the nature and capacity of the partner to lead the activity. 

NZAID has identified ten broad Aid Modality categories clustered according to whether they are high order, contestable, or project modalities. Table 1 below identifies, defines, and gives generic examples of the key Aid Modality categories used by NZAID. Detailed description of each aid modality is provided in Annex I.

All activities should fall into one or other of these categories. Within each category there is often considerable flexibility in the range of possible options for structures, numbers of partners, governance, and design. Some activities may fall on the margins between two categories in which case a judgement call may be required.  Ultimately what is important is the thinking, discussion and documentation of what options are available, their advantages and weaknesses, and whether they are deliverable within the available contracting/funding mechanisms.

Aid Modalities Policy

While all ten categories present legitimate options in different circumstances, NZAID is pursuing a shift across the agency toward the high order modalities. 

In line with Paris Aid Effectiveness targets, NZAID is seeking to move much more of its activity support to the higher order modalities, that allow for larger and more strategic programmes with a high degree of partner ownership. Increasingly, NZAID expects to see such modalities as the default, rather than the exception.

Contestable modalities can offer a means to support many smaller discrete partner led initiatives.  With good modality design, they can foster ownership and active participation by stakeholders and reduce administrative burden to NZAID. However they tend to become major institutions and are appropriate only in limited situations and circumstances.  New activities under these modalities will be rare.

Project Modalities have been important traditional elements of NZODA delivery. Projects will continue to have a significant role but they should not be regarded as the default option. They should be used where higher order modalities are not possible or suitable.

Table 1

	Aid Modality	Definition	Examples
High Order Modalities	International Pooled Funds	Funds pooled at the international or regional level to support a particular theme, sector, country, or purpose and which seek to coordinate the work of a range of agencies and allocations	Contribution to a UN Pooled Fund such as the CERF Support to a Vertical Fund Support to a Delivering as One budget mechanism
	National Poverty Reduction Support	National Poverty Reduction Support is support provided to a bilateral partner government for implementation of national level macro-economic and social policy usually on the basis of a national development plan or poverty reduction strategy and associated development policy dialogue	General budget support to a Constitutionally linked partner government Budget support in support of a national poverty reduction strategy
	Sector Support	Support at the sector level which enables a partner government to lead, manage, implement and resource a strategic sectoral plan	Support to a broad education sector programme of a partner government Budget support to a particular partner government sector
	Organisational Support / Strategic Partnership	This modality covers a range of engagements all of which focus on support for the partner organisation or its work as a whole. It may involve core or programme funding as a contribution to their organisational budget and strategic direction.   A strategic partnership is organisational support where there is a long term engagement between NZAID and a trusted and important not-for-profit partner with whom we share policies, goals and values and find a mutual benefit from a formal partnership. It would likely involve collaboration to further their and our strategic organisational objectives and overall development contribution.	Core funding and policy engagement with a priority Multilateral or Regional Agency Core contribution to a non-priority multilateral or NGO. Core funding for a unique NZ-based agency such as the Council for International Development (CID)
Contestable Modalities	Contestable Fund	An established pool of funds which is allocated via a contestable mechanism involving agreed systems for establishing eligibility, assessment against criteria, reporting, monitoring and evaluation. This can be partner led, NZAID led, or jointly managed.	KOHA-PICD Fund and Programme Management Committee An partner-country based contestable fund to support local NGOs An NZ based fund in which there is a call for proposals
	Scholarships and Training	Specific support for the costs of training and study by individuals, including how they are selected, supported, and assessed.	Scholarships offered in New Zealand education institutions Scholarships offered regionally An in-country training programme
Project Modalities	Partner project	A discrete project (not a sector programme or a strategic partnership) where the key developing country partner (government or NGO) takes the leadership and responsibility for delivery and is directly funded by NZAID.	A project managed and implemented by a partner government ministry. Direct support to a local NGO project in a partner country.
	Joint project (NZAID facilitated)	A discrete jointly managed project where NZAID takes an active role in supporting the delivery or project management, such as involving NZAID staff or NZAID funded contractors in the “design and build” and/or activity cycle management.	An Institutional Strengthening Project for a partner in which NZAID engages a contractor to support implementation of the agreed design A review or evaluation in which NZAID contracts the review team
	Third party project	A discrete grant funded project where a non-developing country partner takes some leadership and would be the key contractual party with NZAID.	A specific project managed by a multilateral agency Support to a New Zealand NGO for activities implemented with in-country partners
	Technical Assistance Project	One-off advisory or technical support which is requested and responded to outside of any broader activity or programmatic involvement in the sector.	Provision of judges or police on a short or long term basis to assist partner country.

Print Table 1

Selecting an Appropriate Aid Modality

Modality options should be considered early in the conceptual thinking for an activity. The modality will be critical to the leadership, process, and content of an activity design. The design process itself will also quickly foreclose on modality options.

For most activities there are in fact only a limited number of possible aid modalities - certainly fewer than the 10 categories above. In some cases the appropriate Aid Modality may be clear from the outset given the nature of the activity (eg scholarships), the relationship with the partner, past history, or NZAID policy.  However in many cases, there may be several possible Modalities and it does not follow that the modality used in the past should be the one adopted in the future. Selecting a modality starts with identifying which modalities are in fact possible.

The following points are key determinants of the available aid modalities:

What is the nature and scope of the planned activity?

The scope of engagement can determine the modality. Where the scope is narrow and contained, the modality will also likely be narrower and more contained. For example if a partner request is for a narrow one-off technical input then this will lend itself to a project or low order modality .. It is important to consider whether the original concept is too narrow to be effective and whether, if NZAID is to respond, we should pursue a broader scope of engagement and modality. Or if a partner government has asked NZAID to be a key donor in a particular sector, then NZAID could consider Sector level programming that might bring together a number of existing project modalities and other donors into one higher order engagement. Some activities such as scholarships or in-country training lead to a modality automatically.

Who is/are the key developing country partner/s?

The partner is often a key determinant of the aid modality. Two modalities - national poverty reduction support and sector level programming - are only applicable where government is the primary partner.   Direct relationships with NGOs will by and large fall into one of the project funding categories except for those that have been identified for Organisational Support/Strategic Partnersship. However if the intent is to provide a vehicle for support to a range of NGOs or other organisations then the appropriate modality may be a contestable fund.

What is the quality of our relationship with the partner and their capacity and will these support the modality and manage risk?

Partner capacity and ‘readiness’ to operate under a particular modality will be an issue. Several higher order modalities such as National Poverty Reduction Support, Sector Support and Organisational Support are based on forms of core support to organisations rather than to discrete activities. These imply greater partner responsibility for leading, governing and implementing the activity. They require additional consideration of partner capacity in areas of governance, policy, strategic and operational planning, financial management and accountability, and engagement with other stakeholders.

Some modalities are more externally implemented and driven and thus less reliant on partner leadership and capacity (such as an NZAID Facilitated Joint Project).  But this can also lead to reduced partner ownership and ultimate sustainability. All modalities should assess partner capacity, and can generally incorporate measures to strengthen capacity where this is needed. 

What is NZAID capacity and can we support the modality?

As part of its efforts to improve aid effectiveness, NZAID is aiming to support fewer, bigger, deeper and longer relationships. Higher order modalities lend themselves well to achieving this, particularly those with a larger scope or more strategic engagement but may have significant up-front resource costs in design and establishment. Project and technical assistance modalities are generally simpler to get going, flexible and responsive, but tend to lead to many lower level relationships with major resource implications if all are to be managed well.

Are there other organisations involved and how might they add value?

Are there other development partners engaged with the partner, the sector, or in the specific activity?  At the early stage of identifying an aid modality, NZAID should consider the roles of other active agencies, and where possible encourage collective or coordinated approaches.  If considering a sector level programme, it will be critical to engage with other donors to the sector and to encourage harmonised approaches.  Where NZAID is being asked for project or technical assistance in areas we are not engaged, the option of directing the request to other agencies who are engaged should be considered, even possibly directing funding via those agencies.  If supporting an NGO partner, it is important to understand who are their other supporters and whether these are playing valuable roles.  Where an local NGO partner is fragile or lacks capacity but have a supportive external partner, perhaps the preferred modality is to channel support via the external partner, particularly if that is a NZ NGO with a strong track record of partnership.

What contracting mechanism(s) would be needed to support the modality and are they feasible?

A modality can only be delivered if NZAID can develop and agree suitable contracting mechanisms with appropriate partners to support it.  It is important to assess available contracting options at the time of selecting the aid modality to ensure what is proposed can be delivered, and that critical requirements such as selection processes and negotiation of contracts can be factored in to planning horizons. This is discussed further in Section C. 

Toward Aid ‘Effectiveness’ Modalities

When identifying an aid modality it is also vital to assess the implications.  Knowing the implications may help to decide between modalities or to determine whether or not it is wise to proceed at all.  In addition, knowing the implications means it is possible to address particular problems through good design.

Some key questions to consider include:

• Will the activity under this modality help NZAID achieve fewer, bigger, deeper and longer relationships? Or, if it is small, are there are good reasons to support it directly or can it be integrated into a larger activity?
• Does the modality offer scope to strengthen partner ownership and leadership?
• Will the modality allow NZAID to engage at a more strategic level? Or are there reasons why we want greater involvement in the detailed delivery?
• Will the modality allow for alignment, strengthening and use of partner systems for planning, procurement, financial management, monitoring and reporting?
• Does the modality maximise potential for donor harmonisation, avoiding duplication, and simple procedures.
• What is the level of complexity and what investment of time and resources will be demanded of the partner and NZAID during establishment and over the lifetime of the activity?
• How might the benefits and costs or value for money differ under the available modalities?
• Will the modality expose NZAID to greater risk including political, institutional, financial and other? Can these risks be assessed and managed or is it better to adopt a lower risk modality?