"The Burn Rate" – Media's Impact on Aid
Posted on July 5, 2010 at 8:00 am
Some years back I worked for a large international charity after a major disaster. As part of the senior management team I attended monthly meetings to discuss our “burn rate”. The burn rate referred to how quickly we spent – or burned through – our money. There was no similar meeting on the quality or impact of our aid.
There were three reasons for these meetings. First, when you develop an aid program you develop a detailed budget for all the activities. If you’re not spending your money on time then you’re probably not implementing on time. These meetings were one way of detecting problems early. The second reason was that headquarters (HQ) regularly reported to the media how much money we had spent on the relief efforts thus far. The faster the organization spent money the better they appeared to the media and therefore to the general public. The final reason was to ensure that all money was spent by the five year anniversary of the disaster. My organization knew that if there were any unspent donations at that time they would get a lot of negative publicity. If the public heard that they hadn’t spent all of the money donated for that disaster they would be less willing to donate to the next disaster. Spending money quickly was paramount.
Unfortunately this caused a lot of problems in the field for our partner organization. We weren’t actually doing most of the work ourselves but instead were paying an organization to do the work for us – this practice is more common than most donors realize. The local organization worked with government offices to determine where the need was greatest and how many people would receive assistance. They then committed to meet those needs using funding provided by my organization.
Unfortunately, for a variety of reasons, the projects were all started later than originally planned which put us behind in our burn rate. To make things worse, my organization had made a major accounting error which meant that we didn’t have as much money for the projects as we’d originally expected. To balance the budget, funds had to be cut from all projects.
Even though our partner organization now had significantly less funding than before they couldn’t decrease the scale of their work because they had already made commitments to the local government and communities, not meeting their commitments would damage relationships. These relationships would be important long after our organization had packed up and gone home. With a decreased budget and no way to decrease the scale of their project, the partner organization was forced to find ways to save money. Staff traveled by bus rather than by car because they could no longer afford to purchase or rent as many vehicles as originally planned, they haggled with hotels for cheaper rates, and scoured stores for sales. All of this slowed down their burn rate even further.
The slow burn rate put the projects in jeopardy. Every three months HQ required us to reevaluate all projects. Any project that was deemed to be spending money too slowly or might not spend all of their budget by the five year anniversary was at risk of losing funding. There was a constant threat that either all or part of the money would be taken from that project and given to a program that could spend it faster.
This put the partner organization under constant stress. If funding were pulled there was no way they could come up with the millions of dollars needed to complete the projects as promised. Our staff was caught in the middle between the very real needs of the partner organization and the demands of HQ. A large part of the funding decisions were based on the ability of the project to burn through money rather than on the quality of the program or what type of assistance was needed the most.
I left the organization fairly disillusioned with the entire process and did not follow up on it to hear how it turned out. However, when the next major disaster struck my old organization was in the news. The headlines did not focus on the quality of the projects, there was no mention of how well the organization met the local needs, nor was there any analysis on how well the organization worked with partnering organizations. The only story that made the headlines was the fact that the organization had not yet spent all of the donations from the last disaster.