Follow the Money: How Trends in Financing Are Changing Governance at International Organizations

Transcription

1 Global Policy Volume 8. Supplement 5. August 2017 Follow the Money: How Trends in Financing Are Changing Governance at International Organizations 15 Drexel University Abstract This article considers how trends in financing are changing governance at intergovernmental organizations (IGOs). Over the course of the twentieth century IGO funding rules changed in two important ways. First, they were altered to allow states greater control over the financial contributions they provide, allowing states to earmark contributions. Second, funding rules made private actors eligible contributors, providing an important entry point for private actor influence. I focus on three primary effects of these changes on IGO governance: (1) how the increased reliance on earmarked contributions undermines traditional conceptions of multilateral governance; (2) how private actors are empowered by their ability to earmark resources as they emerge as major funders; and (3) on the surge in minilateral governance associated with the rise of pooled funding mechanisms. I draw on delegation theory to illustrate these changes conceptually and provide examples from a wide variety of institutions within and outside the UN system. I conclude by outlining fruitful avenues for research on financing IGOs. Special Issue Article Policy Implications Member states should work to loosen or remove the restrictions they place on earmarked funding to restore multilateral governance over a larger portion of IGO resources. IGOs and international relations scholars should conduct systematic empirical analysis to assess how earmarked resources are distributed across issues and countries relative to mandatory and core funding. IGO staff should be ready to turn down earmarked funding when the interests or actions of a donor raise conflict of interest issues. IGOs should improve the transparency of governance arrangements over pooled funding mechanisms Governance of intergovernmental organizations in a changing resource landscape Despite the familiar dictum to follow the money, scholarly work on intergovernmental organizations (IGOs) has not often focused on questions of financing. 1 This oversight left international relations (IR) scholars with little to say about important changes that have occurred in the ways that IGOs are resourced. Recent work brings welcome progress on this front. Scholarship on IGO resourcing seeks to understand donor influence (Sridhar and Woods, 2013; 2015; Reinsberg, 2017), explain donor funding choices (Bayram and Graham, forthcoming; Reinsberg et al., 2015; Nielson et al., Forthcoming), and assess the effects of financial rules and budgeting on key institutional design variables like centralization, control, and flexibility (Goetz and Patz, 2016; Graham, forthcoming). This paper contributes to the growing literature on resourcing by theorizing the links between how IGOs are funded, and who provides the funding, on the one hand, and how IGO governance operates on the other. In doing so, I outline governance implications associated with three topics emphasized by the special issue editors: (1) the growing complexity of the origins and types of funding sources available to IOs; (2) the rising importance of nonstate actors in IO resourcing; and (3) the emergence of new constellations of actors engaged in IGO financing (Goetz and Patz, 2017). Extant research sheds light on three prominent trends in the financing landscape. The first involves the rise in earmarked voluntary resources at IGOs. Earmarked resources are provided by donors with various conditions placed on their use. Donors can earmark contributions for projects or countries that are best aligned with their interests and avoid funding IGO activities they disagree with. The practice of earmarking grew substantially beginning in the 1990s (e.g. UN General Assembly, and ECOSOC, 2011). For example, between 1995 and 2010 earmarked contributions for operational activities for development in the UN system grew by 252 per cent in real terms (UN General Assembly, and ECO- SOC, E/2012/80). By 2012, earmarked resources accounted for 30 per cent of overall contributions to all multilateral organizations, 40 per cent to the World Bank, 2 and fully 70 per cent of the contributions to UN agencies (OECD, 2014). Global Policy (2017) 8:Suppl.5 doi: /

2 16 The second development involves the increased prevalence of private actors as financial contributors to IGOs. The reliance of many post war institutions on mandatory contributions from members meant that IGOs were reliant primarily on financial contributions from states. As mandatory rules were supplemented by those encouraging voluntary contributions, private actors became eligible financial contributors. Like states, private actors are typically allowed to earmark the voluntary funds they provide for specific purposes. The importance of private actors funding varies across IGOs, but the range of actors, which include non-governmental organizations (NGOs), philanthropic organizations, and multinational corporations has increased, along with the size of their contributions. 3 Finally, the third trend involves the increased prevalence of pooled funding mechanisms across a wide range of IGOs. Pooled funding mechanisms are in part a response to the increased use of earmarks by both state and private donors. They are often country- or theme-specific funds in which the financial contributions of donors are co-mingled. Pooled funding represents an attempt by IGOs to allow donors to contribute to initiatives and projects they most value while avoiding some of the pitfalls associated with the rise in earmarked funding. Each of these trends has important implications that challenge our conventional wisdom regarding IGO governance. First, I argue that earmarked resources undermine collective decision-making, and with it, our traditional conceptions of multilateral governance. I utilize the delegation literature in IR to illustrate the point, noting that governance under earmarked resources conforms with a multiple principal model in which individual donors contract and re-contract with IGO staff (Graham, 2015). This argument challenges the conventional wisdom in the literature, which typically employs a collective principal model to illustrate accountability relationships between member states and IGO staff (e.g. Lyne et al., 2006). Second, I highlight how private actors that make financial contributions are integrated in IGO governance in the multiple principal model. In short, private actors are among the principals that contract with and can be expected to exert influence upon IO staff. These changes blur the division between intergovernmental organizations (traditionally viewed as public) on the one hand, and public-private partnerships, and philanthropic organizations on the other. 4 Third, I outline how pooled funding mechanisms have produced a surge in minilateral governance as IGOs attempt to respond to donors desire to control how resources are used while simultaneously eschewing the costs associated with donor earmarks. Pooled funding mechanisms operated by IGOs maintain some of the traditional practices of multilateral governance, albeit with a truncated group of donors that may include both member states and private actors rather than the larger intergovernmental bodies generally associated with IGO governance. To be clear, none of these arguments suggest that intergovernmental, multilateral, IGO governance has disappeared altogether. Indeed, the implications for governance apply only to IGOs that experience these trends, which are most common to organizations engaged in operational activities like development, health, environment al affairs, and the provision of emergency assistance. By contrast, IGO mandates that are confined to facilitating coordination of state policies (e.g. the WTO or regional trade organizations), and those with more modest operational budgets, are less subject to these changes. Further, the trends are not logically linked nor do they always go together in practice. For example, some IGOs may experience increased earmarking by member states, but not an influx of private donors. Nevertheless, the rise of earmarked funding, the empowerment of private actors, and the increased prevalence of pooled funding mechanisms have produced significant and varied changes in IGO governance that require attention from scholars and policy makers alike. In what follows, I outline how each resourcing trend alters IGO governance, before concluding with a set of objectives for future research. Two models of IGO governance Both conventional wisdom and IR scholarship hold that intergovernmental organizations exhibit multilateral governance. The practice of multilateralism within IGOs is often contrasted with bilateral and unilateral action outside those institutions. Indeed, the labels intergovernmental organizations and multilateral organizations are often used interchangeably. This characterization of IGO governance stems in part from an implicit or explicit reliance on voting and decision rules to identify how governance works. When member states decide issues based on a majority vote or by consensus they appear to be behaving consistent with multilateral practice. Yet an emphasis on voting rules alone to identify multilateral governance can be misleading. When we train attention on how IGOs are funded, a very different picture may emerge. The delegation literature in IR provides a useful set of tools for thinking about how reliance on different types of financial contributions influence IGO governance. Principal-agent models explicate the delegation relationships between member states (the principal) that delegate authority to IGO staff (the agent) to act on their behalf (Bradley and Kelley, 2008; Nielson and Tierney, 2003; Pollack, 1997; Graham, 2014). In particular, collective and multiple principal models represent two distinct modes of IGO governance. As Figure 1 illustrates, a collective principal is commonly used to depict IGO governing bodies in which members come to a joint decision (according to some rule) and then enter into a single contract with an agent (Lake and McCubbins, 2006). IGO voting rules generally comply with this definition of joint decision-making, which conforms with traditional conceptions of multilateral practice. Collective principal models do not allow individual members of the collective principal to contract or re-contract directly with the agent (Tierney, 2008, p. 361). Contracting with the agent is contingent on a joint decision among members of the collective. By contrast, multiple principal models represent an alternative mode of IGO governance that offers a fundamentally Global Policy (2017) 8:Suppl.5

3 How Trends in Financing are Changing Governance at International Organizations 17 Figure 1. Collective and multiple principal models. Collective Principal Model Member states make joint decisions IO Agent Donors make individual decisions Multiple Principal Model IO Agent different decision making and accountability structure. In a multiple principal model, each principal enters into a separate contract with the agent (Lake and McCubbins, 2006, p. 361). Unlike in a collective principal model, multilateral decision-making is not required to contract with the agent, to exert influence, or to hold it accountable. This introduces a distinctly bilateral element into IGO governance (Graham, 2015). Individual actors enter into bilateral relationships with the IGO bureaucracy to initiate programs, and can exert control over the agent using rewards and punishments without reaching agreement with other member states. Which model best reflects IGO governance? The answer varies across the type of funding that IGOs receive. The next section outlines how the reliance on earmarked resources produces governance that undermines multilateralism, is best represented by the multiple principal model, and is distinct from governance produced by other contribution types. How the rise in earmarked resources matters for IGO governance Early in the postwar era, prominent IGOs often relied primarily on mandatory contributions from states. As new operational programs for economic development and emergency relief were established over time, IGOs added rules inviting voluntary contributions to supplement mandatory funding systems. These early voluntary rules typically prohibited states from earmarking their contributions, often noting that the practice would undermine multilateral governance. Throughout the latter half of the twentieth century, however, rules were added or amended such that prohibitions on earmarks were lifted (Graham, forthcoming). Rule changes opened the door to the rise in earmarked resources that allowed a shift from multilateral governance reflected in the collective principal model, to a model more akin to hub-and-spoke bilateralism reflected in the multiple principal model. This section addresses how different types of financial contributions reinforce or undermine multilateral governance in IGO governing bodies. Mandatory assessments and legally binding negotiated pledges 5 Mandatory assessment systems require member states to make financial contributions to intergovernmental organizations as a legal obligation of membership. Typically, a committee of member states uses agreed upon formulae to determine assessments, which are then approved by the relevant intergovernmental body. At the United Nations, the Committee on Contributions reviews the distribution of assessments, which is approved by the General Assembly. Other IGOs use similar mandatory systems. For example, the Global Policy (2017) 8:Suppl.5

4 18 International Development Agency at the World Bank and the Global Environment Facility are funded by legally binding negotiated pledges. Negotiated pledges are legally binding for states that agree to a particular scale that distributes burden sharing across members (Multi-Partner Trust Fund Office, 2015). Mandatory funding requirements reinforce multilateral governance by intergovernmental bodies in at least two ways (Graham, 2015). First, the legal obligation associated with mandatory systems creates costs for member states that withhold funds. Standard material costs include the loss of voting rights for states in arrears. States can also face significant criticism and incur reputational costs by violating their legal commitments (Guzman, 2002). Historically these costs do not eliminate withholding, but they do provide incentives against it and underfunded mandates decline as a result. Second, mandatory funding systems prohibit states from placing conditions (i.e. earmarks) on the contributions they provide. It is the governing body rather than individual donor states that determine how contributions are used. The obligation to provide funds and the prohibition on earmarks reinforces joint decision-making. As a result, governance over mandatory funds conforms to standard conceptions of multilateral governance represented in the collective principal model. Voluntary core contributions Voluntary funding rules do not involve a legal obligation to financially support the institution. Many IGOs employ a combination of mandatory and voluntary funding rules such that member states are obligated to provide an assessment, but both member states and non-state actors can provide voluntary funding. 6 Numerous IGOs, including a number of prominent UN institutions, like UNDP and UNICEF, lack mandatory rules altogether. This means that while the governing bodies of UNDP and UNICEF are formally endowed with the political authority to set program priorities and allocate resources through their collective decisions, funding rules are such that member states are not obligated to accept these multilateral decisions as binding. The tension between decision-making power allocated by voting rules and the absence of a legal obligation for member states to support those decisions financially, undermines the force of multilateral decisions. As a result, IGOs that are reliant primarily on voluntary core contributions may be prone to underfunded mandates, but intergovernmental bodies will retain control over how contributions received are distributed. Earmarked voluntary funding Earmarked funding is a term used to refer to voluntary contributions that donors place restrictions on. 7 Early UN programs prohibited earmarks on financial contributions on the grounds that the practice compromised the multilateral character of UN institutions (Graham, 2015). Financial rules were altered as programs evolved, allowing them to expand into new program areas and increase funding. Restrictions can be negative in the sense that a donor prohibits the use of funds for some activity (e.g. my contribution cannot be used for programs in Cuba) or positive in the sense that the donor specifies a country- or project-specific use for the contribution (e.g. my contribution is specifically for HIV/AIDS programs in Nigeria). Most trust funds fall into the category of earmarked funding. Trust funds are typically established through negotiation between a potential donor (or donors) and the IGO staff, and are designed to support a particular program, theme or recipient country. Trust funds are in widespread use at the World Bank, and they are increasingly employed by other multilateral development banks (MDBs) including the African, Inter-American, and Asian Development Banks (AfDB 2013). Although multi-donor trust funds and funds with a broad thematic purpose are encouraged, many are single donor, and project-specific (AfDB 2013; UN General Assembly and ECOSOC, 2011). Indeed, 92 per cent of earmarked funds to UN institutions were from a single donor and project-specific in 2013 (UNDG, 2015). Donors place a wide variety of earmarks on contributions that can range from soft/light through to hard/tight (UN Joint Inspections Unit, 2007, 9). The most commonly discussed examples are similar to the project- or country-specific cases noted above. This allows donors to contribute to regions in which they have a strategic interest or program themes that are of domestic concern, much as they do in the case of bilateral aid. Another common condition stipulated by donors makes the provision of contributions contingent on using the donor s preferred implementing partners or, in the case of in-kind contributions, stipulating that goods or services must be purchased from a specific location. Consistent with the multiple principal model, earmarked resources effectively empower donors to bypass IGO governing bodies and contract directly with high-level IGO staff. The authority to determine funding priorities is effectively transferred from the governing body to individual donors. As the OECD notes, earmarked resources have oversight and governance that is not under the purview of the board of the organization in question (OECD, 2010, p. 40). The extent to which the allocation of resources diverges from governing body decisions depends on many factors. The difference may not be substantial if donors earmark for different substantive and geographic priorities. But if the substantive and geographic priorities of individual donors in the aggregate are different from those set by governing bodies, the practice of earmarking has the potential to alter IGO priorities and resource distribution (Bull et al. 2004; Waddington 2004; Graham 2015). For example, in the UN System, The strategic distortions and substantial transaction costs resulting from this increased reliance on earmarked resources have dominated the discussions on financing of the UN Development System (UNDG 2016, p. 2). To date the IR literature has focused primarily on how earmarked resources empower wealthy donor states to exert influence on IGOs. However, in contrast to mandatory funding systems, voluntary funding rules typically allow private Global Policy (2017) 8:Suppl.5

5 How Trends in Financing are Changing Governance at International Organizations 19 actors to provide funds. This empowers private actors to participate and potentially exert considerable influence on IGO programs alongside their public counterparts. Private actors, earmarked funding, and IGO governance The inclusion of private actors as financial contributors to IGOs is not an entirely new phenomenon, but their contributions have become increasingly important in recent decades (Bull et al. 2004; Goetz and Patz, 2017). Private actors include corporations, philanthropic foundations, and non-governmental organizations (NGOs). Recent work in IR has made strides to explain how IGO access and participation by these actors has evolved over the years. In a path-breaking study, Tallberg et al. (2014) demonstrate the growing involvement of private, transnational actors at IGOs across a wide range of issue areas. 8 Yet funding rules remain an unexplored feature of IGO design that can prohibit or enable access and influence to private actors. When IGOs rely on mandatory assessments private actors are effectively excluded from the process. When this is the case, they not only lack the formal voting rights of states, but are also eliminated as potential contributors since binding funding obligations apply only to members. By contrast, voluntary funding rules typically broaden donor eligibility to include private actors. The founding documents at UNICEF and the UN Capital Development Fund provide examples. UNICEF rules note that the Fund will rely on assets made available by Governments, voluntary agencies, individual or other sources. 9 Similarly, rules at the Capital Development Fund note that the costs of its operational activities are to be met from the voluntary contributions made in cash or in kind by participating Governments, before further adding that, Voluntary contributions from sources other than Governments might also be invited (UN Yearbook, 1966, p. 286). The proclivity for IGOs to supplement mandatory funding systems with voluntary contributions initially stemmed from some member states objection to growing mandatory budgets and others desire to expand IGO activities (Graham, forthcoming). In an era in which even prominent IGOs face increased competition for funds (Cooley and Ron, 2002; Graham, 2015), voluntary rules hold the advantage of empowering IGO staff to expand their resource base beyond traditional donors. To return to the delegation models discussed above, under earmarked voluntary funding rules private actors influence IGO staff through the contributions they provide, just as states do in the multiple principal model. While they lack voting rights alongside member states, like states, private actors can enter into a contract with the IGO and earmark their contributions for the projects or countries they choose. To illustrate the point conceptually and provide an example, Figure 2 integrates some of the top private and public actors that contribute voluntary earmarked resources to the WHO in a multiple principal model. In the example, the contributions of the Gates Foundation and Rotary International may buy influence through earmarked voluntary contributions just as wealthy member states that choose to do so. Although systematic data on private actor contributions is lacking (McCoy et al., 2009; Grady, 2014), 10 a wide range of non-state entities act as important IGO donors. Seitz and Martens (2017) note that within the UN system, private funding has grown steadily. IGOs working in global health have proven particularly attractive for private actors. For example, private sector contributions represented 28.8 per cent of UNICEF funding in 2007 (McCoy et al., 2009). The WHO has attracted an even greater share of its resources Figure 2. Example of private and public actors in a multiple principal model. United States Gates Foundation United Kingdom WHO staff Rotary International France Global Policy (2017) 8:Suppl.5

6 20 from private sources. In 2015 the WHO received contributions from 197 non-state actors contributing a combined $804,196,341 billion or 48 per cent of all earmarked voluntary contributions (WHO, 2016). Among this group, the Bill & Melinda Gates Foundation stands out with a contribution of $181,820,644 billion, third only to the United States and United Kingdom. Other private actors making substantial contributions to the WHO include the National Philanthropic Trust, a public charity and grant-making institution in the United States ($86 billion), and Rotary International ($56 billion). A wide range of corporations from a variety of economic sectors also make the list, which includes pharmaceutical companies, along with those that work in pesticides and chemicals, textiles, healthcare, and water filtration systems. Many of the corporations are European or American, but companies from Japan, China, and India also make contributions (WHO, 2016). Variation in private actor contributions across issue areas and IGOs are ripe for investigation. In sectors outside global health, private contributions to IGOs remain more modest. For example, private actors make significant contributions to World Bank climate funds, but unlike in global health, they are not on par with those of the most generous states. 11 Similarly, a recent study of the five UN agencies with humanitarian mandates (UNHCR, World Food Program, UNI- CEF, the UN Relief and Works Agency for Palestine Refugees (UNRWA) and the WHO) found that less than 8 per cent of the total budget for humanitarian activities (i.e. $569 million of $7.1 billion) was comprised of contributions from private actors (Stoianova, 2012). Despite this variation, interviews with officials at the United Nations indicate that across issue areas, IGO staff are eager to expand their resource base to include greater participation from the private sector alongside more traditional donors. 12 The increased participation of private actors as important contributors of earmarked funds requires scholars and policy makers to consider their influence within and across IGOs. As noted above, the multiple principal model of governance allows but does not guarantee that donors will exert influence in ways that skew resources toward a set of priorities that are distinct from those endorsed by multilateral bodies. In addition, governance through a multiple principal model may heighten the importance of IGO staff who lobby individual donors to support their preferred priorities (Graham, 2015, p. 188). The latter possibility is particularly relevant in the case of private actors that are primarily interested in positive publicity, but lack a strong policy agenda of their own. 13 Although the expectation that greater contributions translate into more influence over IGO programming is plausible, private actors represent a diverse group with varying motivations to contribute. Studies of private actors foreign aid contributions often emphasize altruism and a desire to make a positive impact (Smith, 2014). B uthe et al. (2012) find that the aid allocation decisions of NGOs (rather than all private actors) is driven by recipients humanitarian need rather than organizational self-interest. Yet others emphasize that private actors interests and experience are key to understanding their behavior. Grady (2014, p. 20) finds that private actors funding choices are more likely to be driven by internal factors, including the interests of the founders, the living donors, Board members, or company rather than external ones, like national development priorities, or filling gaps in aid. Other studies find that private actors funding choices are based primarily the recommendations and opinions of friends, trusted people, and trusted intermediaries, or, put simply, word of mouth. (Kapur and Whittle, 2009, p. 1159). Both arguments make clear the need to treat private actors motivations as an empirical question rather than a theoretical assumption in future work. Thus far the paper has focused on how the trend toward increased reliance on earmarked resources and the influx of contributions from private actors alters IGO governance. By contrast, the next section considers reactions to these trends. In particular, it draws attention to the governance model produced by pooled funding mechanisms, often referred to as multi-donor or multi-partner trust funds, that are operated by a wide range of contemporary IGOs. The new minilateralism produced by pooled funding mechanisms is characterized by fund-specific governance arrangements that can incorporate both state and private actors. Pooled funding and minilateral governance After emerging as a challenge to IGO programming in the 1990s and becoming more prominent in the 2000s, discussion of how to deal with the problems associated with earmarked funds is now commonplace. Two strategies have emerged to scale back reliance on earmarked resources. First, many agencies and programs have formal policies to encourage donors to reallocate contributions in ways that restore the authority of multilateral decision-making to govern budgetary priorities. In a 2009 resolution the General Assembly notes with concern the heavy reliance on earmarked resources and urges donor countries and other countries in a position to do so to substantially increase their voluntary contributions to the core/regular budgets of the United Nations development system, in particular its funds, programmes and specialized agencies. 14 Many IGOs have made similar pleas to donors, requesting that donors increase voluntary core funding and increase mandatory assessments. For example, the UN Environment Program (UNEP) seeks a shift toward increased unearmarked funding as its first principle in a new budget strategy and the General Assembly has increased the mandatory contributions the Program receives (UNEP, 2014, pp. 1 2). To the extent that efforts to persuade donors to provide more of their funding as voluntary core resources or to increase mandatory funding requirements are successful, it should have the effect of increasing the proportion of IGO resources governed by traditional multilateral practice. The authority of intergovernmental bodies will benefit to the extent donors conform to the request. A second strategy commonly employed by IGOs in response to the rise in earmarked resources is the establishment of pooled funding mechanisms. Pooled funding mechanisms (also referred to as multi-donor trust funds), can be Global Policy (2017) 8:Suppl.5

7 How Trends in Financing are Changing Governance at International Organizations 21 established at the behest of donors or IGO staff. They are essentially new pots of money that are issue-area or country-specific. The importance of pooled funds is expected to increase. The UN Development Group notes that although pooled funding mechanisms are relatively new to the UN financial ecosystem, becoming prevalent only after 2004, pooled financing mechanisms are expected to play an increasingly strategic role in financing the new development agenda (UNDG 2016, pp. 1 3). 15 As Reinsberg (2017) demonstrates with regard to World Bank trust funds, donors may propose a new theme that aligns with their interests in order to improve influence over IGO programming. The specificity of pooled funds allows donors considerable discretion over what priorities they support. If a donor wants to avoid providing aid to a particular state, they can simply refrain from contributing to the pooled fund designed to assist that state. Donors can also align their funding choices with their strategic interests, for example, by supporting funds that support developing states in their region. The Multi-Partner Trust Fund Office (MPTFO), housed at UNDP, currently manages 60 such multi-partner funds, and provides a prominent example of the approach. Most funds operated by MPTFO are country or theme based, allowing donors to support recipients or themes that reflect their interests. Many climate investment funds, including those operated by UN institutions, the World Bank, and the International Fund for Agriculture Development (IFAD), work similarly. While the specificity of many pooled funding mechanisms provides donors with some discretion, within each mechanism resources are co-mingled and remain unearmarked. 16 For example, the Clean Technology Fund (CTF) and the Forest Carbon Partnership Facility (FCPF) at the World Bank are funded by unearmarked voluntary contributions. 17 Pooled funding mechanisms are often governed by actor constellations that are distinct from the full IGO membership. For example, the full Executive Board does not typically govern pooled funding mechanisms housed at the World Bank. Although the model used to govern pooled funds varies, they are often characterized by minilateralism (see Kahler, 1992) in which some truncated set of member states and/or private actors exercise authority over the pooled fund. In the context of delegation theory, pooled funding mechanisms represent a collective principal model, but with fewer actors making up the collective principal. As Figure 3 indicates, minilateral governance of pooled funding mechanisms typically includes some subset of member states from the full executive body of the IGO. In Figure 3, three members from the full IGO executive board are also members of the body that governs the pooled fund. States that are recipients of assistance from pooled funding mechanisms, and especially the donors to those funds, are typically Figure 3. Contrasting minilateral, pooled-funding mechanism governance and general governance of mandatory and voluntary core resources at IGOs a Governance by full IGO executive Board Mandatory or voluntary core resources Minilateral governance by subset of IGO executive board in addition to outside donor Pooled Funding Mechanism Note: a To be clear, some states will be members of the standard IO intergovernmental body and the smaller minilateral CP that governs a given pooled funding mechanism. Although in general we can think of standard IGO intergovernmental bodies (like the UNDP or World Bank Executive Boards) as more inclusive than the minilateral arrangements governing pooled funds, it is important to note that unlike intergovernmental bodies, governance of pooled funding mechanisms is often open to non-state actors that make financial contributions. In this way, they are often more inclusive with regard to the type of actors that are represented in governance arrangements. Global Policy (2017) 8:Suppl.5

8 22 involved in fund governance. For example, the CTF and FCPF are not governed by the full membership of the World Bank Executive Board, but rather through more exclusive arrangements. The CTF Trust Fund Committee, populated by eight recipient states and eight contributor countries governs the CTF. In an alternative model, at the UN s Office for the Coordination of Humanitarian Assistance (OCHA), country-based pooled funds are governed by country-level teams led by OCHA staff that include representatives from contributor countries along with government and civil society actors in the recipient state. In some instances, governing arrangements of pooled funding mechanisms may include private actors that are not part of normal IGO governance. For example, the World Bank s FCPF is governed by an exclusive group of contributing parties, which includes both state and private actors. While formal voting rights in the full governing bodies of major IGOs remains rare (Grigorescu, 2015; Tallberg et al., 2014), private actors may be more likely to be granted formal voting rights in the governance of pooled funds, as they are in the FCPF case. Figure 3 indicates this possibility by depicting an actor that is not a member of the IGO executive board that nevertheless participates in minilateral governance of the pooled fund. The popularity of pooled funding mechanisms represents a surge in minilateral governance arrangements. Although the inclusion of multiple donors is aimed at eschewing the problems associated with single-donor earmarks, IGOs should recognize that the proliferation of pooled funds can produce similar costs. First, the number of funds and the diversity across minilateral arrangements makes ascertaining who exerts authority over which funds a significant task. Researchers cannot assume that intergovernmental bodies like the executive boards at the World Bank or UNDP are most relevant when considering governance of pooled funds. Given the complexity of these arrangements, transparency regarding how authority is allocated and how decisions are made is particularly important. In addition, just as individual earmarks produce high transaction costs for IGO staff, so too can a proliferation of pooled funds, particularly when representation, voting, and funding rules vary across mechanisms. To minimize this problem IGOs should produce standard arrangements that apply across pooled funds. Moving forward Contemporary IGOs exist in a dynamic resource environment. Just as IGOs themselves must adapt, so too must IR scholars reconsider old conceptions of governance and influence in light of these changes. This article has considered three ways in which changes in IGO financing alter governance arrangements. First, multilateral decision-making and the authority of IGO intergovernmental bodies is undermined by reliance on earmarked voluntary resources. To the extent that reliance on earmarked resources increases, the proportion of funds governed through multilateral decision-making declines and individual donors are empowered to exert influence commensurate with their financial contributions. Second, although donor earmarks may generally increase the influence of Western donors that account for the majority of IGO funding, private donors can also be empowered to exert influence alongside their public counterparts. 18 This means that while private actors continue to lack voting rights in the primary IGO governing bodies, they may gain substantial influence by directly contracting with IGO staff to provide earmarked contributions. Third, pooled funding mechanisms have emerged as a popular policy tool as IGOs seek middle ground between earmarked resources and mandatory and voluntary core funding. The proliferation of these mechanisms produce a diverse set of minilateral governing bodies that exercise authority over individual funds. In some cases, private actors can sit alongside their state counterparts in making decisions about projects and programming. Future research In response to the growing importance of earmarked funds, future research should consider the extent to which reliance on earmarked resources alters program priorities. Although a number of articles suggest this might be the case, few evaluate the hypothesis systematically. Rima (2014) provides an exception and finds that the primary benefit of earmarking is better tracking of results. However, its effects on need-based allocation were less positive. The study finds that in Kenya, earmarking by donors was associated with a lack of equity and inflexibility in resource allocation. Earmarked funds were sometimes allocated for needs that are already met, and provided assistance in excess of needs by forcing organizations to continue with projects even when the need has shifted (Rima, 2014, p. iv). The rise in donor earmarks and the transition to the governance via the multiple principal model also raise important questions regarding the role of IGO staff. Specifically, future work should identify the conditions under which IGO staff are empowered or constrained by earmarked resources. 19 On the one hand, IGO staff can make direct, strategic appeals to powerful audiences in order to increase funding, empowering them to pursue their preferred priorities. At the same time, voluntary funding creates incentives for IGO staff to pursue programs that will be most popular with wealthy donors, which could distort program priorities, and reduce autonomy. Research must also investigate the benefits and deficiencies associated with private actors participation as IGO donors. They provide a clear benefit by expanding the donor base in a resource-scarce landscape. However, increased contributions also introduce the potential for undue influence. Future research can shed light on the motivations and effects of various types of actors. While many private actors are likely to contribute for strictly charitable reasons, others are likely to expect something in return. Some have raised alarm bells regarding possible conflicts of interest between the WHO and pharmaceutical companies that that often make sizeable financial contributions to the organization (Chow 2010). These concerns are consistent with those raised regarding public-private partnerships (PPPs) in global governance (Buse and Harmer 2007; Buse Global Policy (2017) 8:Suppl.5

9 How Trends in Financing are Changing Governance at International Organizations 23 and Walt 2000). More generally, the presence of private actors as prominent IGO financiers suggests that the lines between (ostensibly public) IGOs, NGOs, and PPPs are blurry. Scholars must think carefully about these distinctions rather than assume that traditional designations are meaningful. Finally, IGO scholars should consider the rise of minilateral governance within IGOs in a systematic fashion. Minilateral governance often involves subgroups of member states and non-state donors engaging in the governance of issue and country-specific pooled funding mechanisms. Governance of such mechanisms varies considerably, with some governing bodies populated by a combination of donors and recipients, some donors-only, and others providing privileged positions to IGO staff. To the extent that pooled funding mechanisms satisfy donors desire for control, they may be useful in decreasing reliance on earmarked contributions. Future scholarship should consider whether MDTFs are successful in helping IGOs to achieve this goal. Notes An earlier version of this article was presented at the workshop, Resourcing international organizations: actors, processes and budgets at Ludwig-Maximilians-Universitat Munchen, June The author thanks Klaus Goetz, Ronny Patz, Bernhard Zangl and the workshop participants for their helpful comments and Alexandria Serdaru for research assistance. 1. Notable (early) exceptions include Stoessinger (1964) and Alger (1973). 2. On the prevalence of donor earmarking at the World Bank see Reinsberg (2017). 3. On the growing importance of private philanthropic organizations see Seitz and Martens (2017). 4. On public-private partnerships (PPPs), see Browne (2017). On philanthropic organizations, see Seitz and Martens (2017). 5. The terminology used in this section reflects the terms and definitions used by the United Nations in its 2015 report on financing instruments in the UN development system. In practice, terminology varies. Voluntary core contributions are variously referred to as regular resources, core contributions, multilateral contributions, or unearmarked, unrestricted, and undirected contributions. Earmarked contributions are referred to as non-core, restricted, bilateral, bi-multilateral, directed, and co-financing contributions. In the context of the specialized agencies, regular resources or regular budget refer to mandatory assessments. Extra-budgetary resources refer to voluntary contributions, which may or may not be earmarked. 6. For funding rule data for UN programs and funds ( ), see Graham The question of why voluntary funding rules are designed at some IGOs and not others and why actors earmark contributions to some IGOs and not others fall outside the scope of this paper. However, these questions are taken up elsewhere. For example, Bayram and Graham (forthcoming) hold voting rules constant and demonstrate that donors proclivity to earmark increases when donor preferences are not aligned with those of the IGO majority coalition in the IGO governing body. Graham (2016) indicates that voting rules influence who earmarks. For example, when weighted voting rules privilege larger states, smaller donors have stronger incentives to earmark whereas the most powerful states have stronger incentives to earmark in one country, one vote systems. 8. It is worth noting that this section is confined to the provision of earmarked resources by private actors to IGOs and its potential effects on governance. It does not consider governance of publicprivate partnerships, defined as agreements for collaborative governance between public actors and non-state actors, which establish common norms, rules, objectives, and decisions-making procedures for a set of policy problems (Andonova 2010, p, 25). However, some insights regarding the potential for conflicts of interest that have emerged in the PPP literature are also relevant to the provision of earmarked funds by private actors to IGOs. I return to this point in the conclusion. For an emphasis on PPPs in the special issue, see Browne (2017). 9. GA 57(1) Establishment of an International Children s Emergency Fund. 11 December Data collection is made difficult in part by IGO accounting techniques, which often group together private donors with other non-state, public donors, such as other IGOs, and public-private partnerships like UNAIDS or the Global Fund. For example, UNDP (2014). 11. For example, BP and The Nature Conservancy (TNC) make contributions to the World Bank s Forest Carbon Partnership Facility on par with those of France and Canada, but trail far behind the most generous donors. 12. Author interviews included IGO staff in the fields of security (UN Peacebuilding Support Office, 18 August 2015), Environment (UN Environment Program, 30 July 2015), and humanitarian assistance (UN Office for the Coordination of Humanitarian Assistance, 14 July 2015). 13. Also, see Ege and Bauer (2017) on the effect of earmarked resources on IO autonomy. 14. UNGA Resolution 63/311, For a more in-depth discussion of the consequences of increased earmarking see Graham (2015); Sridhard and Woods (2013). 16. There are exceptions to this general rule. The UN-REDD Program Fund and MDG Achievement Fund, both at the UN, allow withinfund earmarks. There are also ways to work around formal rules that prohibit earmarking. For example, some World Bank trust funds that formally prohibit earmarking allow donors to informally request that funds be used for a particular purpose, which the Bank attempts to fulfill without making guarantees (Herrmann et al. 2014). On the practice of evading international rules more generally, see Buzas (Forthcoming). 17. Personal communication with FCPF staff (25 March 2016) and personal communication with CTF staff (10 May 2016). 18. The ability to provide earmarked voluntary contributions may also be attractive to non-traditional state donors, like China, India, or Saudi Arabia, since it empowers them to provide funding for causes they prefer and avoid those of less interest. 19. See Ege and Bauer (2017) on the effect of earmarked resources on staff size. References African Development Bank Group (AfDB) (2013) Trust Fund Management at the African Development Bank: An Independent Evaluation, Tunis: AfDB. Alger, C. F. (1973) The United States and the United Nations, International Organization 27(1), Andonova, L. B. (2010) Public private Partnerships for the Earth: Politics and Patterns of Hybrid Authority in the Multilateral System, Global Environmental Politics, 10 (2), Bayram, A.B. and Graham, E.R. (Forthcoming) Financing the United Nations: Explaining Variation in How Donors Fund the UN Review of International Organizations. DOI: /s Bradley, C. A. and Kelley, J. G. (2008) The Concept of International Delegation, Law and Contemporary Problems, 71(1), Browne, S. (2017) Vertical Funds: New Forms of Multilateralism, Global Policy, 8 (S5), pp Global Policy (2017) 8:Suppl.5

10 24 Bull, B., Boas, M. and McNeill, D. (2004) Private Sector Influence in the Multilateral System: A Changing Structure of World Governance?, Global Governance, 10 (4), Buse, K. and Harmer, A. M. (2007) Seven Habits of Highly Effective Global Public-private Health Partnerships: Practices and Potential, Social Science & Medicine, 64, Buse, K. and Walt, G. (2000) Global Public-private Partnerships: Part II What are the Health Issues for Global Governance?, Bulletin of the World Health Organization, 78 (5), B uthe, T. Major, S. and Mello e Souza, A. The Politics of Private Foreign Aid: Humanitarian Principles, Economic Development Objectives and Organizational Interests in NGO Private Aid Allocation, International Organization, 66 (4): Buzas, Z. I. (Forthcoming) Evading International Law: How Agents Comply with the Letter of the Law but Violate its Purpose, European Journal of International Relations. DOI: / Chow, J. (2010) Is the WHO Becoming Irrelevant? Why the World s premier public health organization must change or die Foreign Policy. 9 December [accessed 21 April 2017]. Cooley, A., and Ron, J. (2002) The NGO Scramble: Organizational Insecurity and the Political Economy of Transnational Action, International Security, 27 (1), Ege, J., and Bauer, M. W. (2017) How Financial Resources Affect the Autonomy of International Public Administrations, Global Policy, 8 (S5), pp Eichenauer, V. Z. and Reinsberg, B. (Forthcoming) What Determines Earmarked Funding to International Development Organizations? Evidence from the New Multi Bi Aid Data, Review of International Organizations. DOI: /s Goetz, K. H. and Patz, R. (2016) Pressured budgets and the European Commission: Towards a More Centralized EU Budget Administration?, Journal of European Public Policy. 23 (7), Goetz, K. H. and Patz, R. (2017) Resourcing International Organizations: Resource Diversification, Organizational Differentiation, and Administrative Governance, Global Policy, 8 (S5), pp Grady, H. (2014) Philanthropy as an Emerging Contributor to Development Cooperation, New York: United Nations Development Program. Graham, E. R. (2014) International Organizations as Collective Agents: Fragmentation and the Limits of Principal Control at the World Health Organization, European Journal of International Organizations, 20 (2), Graham, E. R. (2015) Money and Multilateralism: How Funding Rules Constitute IO Governance, International Theory, 7 (1), Graham, E. R. (Forthcoming) The Institutional Design of Funding Rules at International Organizations: Explaining the Transformation of Financing at the United Nations, European Journal of International Relations. DOI: / Grigorescu, A. (2015) Democratic Intergovernmental Organizations? Normative Pressures and Decision-making Rules. Cambridge: Cambridge University Press. Guzman, A. (2002) A Compliance-based Theory of International Law, California Law Review, 90 (6), Herrmann, S., Kukenshoner, C., Reinsberg, B. and Tesfaye, Y. (2014) Analysis of German Trust Fund Portfolio at the World Bank and Guidance on Reforms. Berlin: Deutsche Gesellschaft fur Internationale Zusammenarbeit. Kahler, M. (1992) Multilateralism with Small and Large Numbers, International Organization, 46 (3), Kapur, D. and Whittle, D. (2009) Can the privatization of foreign aid enhance accountability, NYU Journal of International Law & Politics., 42 (4), Lake, D. and McCubbins, M. (2006) The Logic of Delegation to International Organizations, in Hawkins, D., Lake, D., Nielson, D. and Tierney, M. (eds.), Delegation and Agency in International Organizations. New York: Cambridge University Press, pp Lyne, M., Nielson, D. and Tierney, M. (2006) Who delegates? Alternative models of principals in development aid, in Hawkins, D.G., Lake, D., and Nielson, D. (eds), Delegation and Agency in International Organizations. New York: Cambridge University Press, Seitz, K. and Martens, J. (2017) Philanthrolateralism: Private Funding and Corporate Influence in the United Nations. Global Policy, 8 (S5), pp McCoy, D., Chand, S. and Sridhar, D. (2009) Global Health Funding: How Much, Where it Comes From and Where it Goes, Health Policy and Planning 24 (6), pp Multi Partner Trust Fund Office (2015) Financing the UN Development System: Getting It Right for a Post-2015 World, Dag Hammarskjold Foundation. Uppsala, Sweden Nielson, D., and Tierney, M. (2003) Delegation to International Organizations: Agency Theory and World Bank Environmental Reform, International Organization, 57 (2), Nielson, D., Parks, B. and Tierney, M. (Forthcoming) International Organizations and development finance: Introduction to the Special Issue, Review of International Organizations. DOI: /s OECD (2010) DAC Report on Multilateral Aid, OECD. Paris, France OECD (2014) Making Earmarked Funding More Effective: Current Practices and a Way Forward, in P. Tortora and S. Steensen (eds). OECD. Paris, France Pollack, M. A. (1997) Delegation, Agency, and Agenda Setting in the European Community, International Organization, 51 (1), Reinsberg, B. (2017) Trust Funds as a Lever of Influence at International Development Organizations, Global Policy, 8 (S5), pp Reinsberg, B., Michaelowa, K. and Knack, S. (2015) Which Donors, Which Funds? The Choice of Multilateral Funds by Bilateral Donors at the World Bank, Policy Research Working Papers. Washington, DC: The World Bank. Rima, K. D. (2014) The Effect of Earmarking Donor Funds: A Case of Agricultural Based Non Governmental Organizations in Kenya. United States International University-Africa. Nairobi, Kenya. Ruggie, J. G. (1992) Multilateralism: The Anatomy of an Institution, International Organization, 46 (3), Smith, B. H. (2014) More than Altruism: The Politics of Private Foreign Aid. Princeton, NJ: Princeton University Press. Sridhar, D., and Woods, N. (2013) Trojan Multilateralism: Global Cooperation in Health, Global Policy, 4 (4), Stoianova, V. (2012) Private Funding: An Emerging Trend in Humanitarian Donorship, Bath: Global Humanitarian Assistance. A Development Initiative. Stoessinger, J. (1964) Financing the UN System. Washington, DC: Brookings Institution. Tallberg, J., Sommerer, T., Squatrito, T. and Jonsson, C. (2014) Explaining the Transnational Design of International Organizations, International Organization, 68 (4), Tierney, M. (2008) Delegation Success and Policy Failure: Collective Delegation and the Search for Iraqi Weapons of Mass Destruction, Law and Contemporary Problems, 71, UN General Assembly, and ECOSOC (2011) Analysis of Funding for Operational Activities for Development of the United Nations System for 2009 (Advanced Unedited Version 18 May 2011), Geneva: United Nations UN General Assembly and ECOSOC (2012) Analysis of Funding for Operational Activities for Development of the United Nations System for 2009: Report of the Secretary General,. UN Joint Inspections Unit (2007) Voluntary Contributions in United Nations System Organizations: Impact on Programme Delivery and Resource Mobilization Strategies. Geneva: UN Joint Inspections Unit. UNDG (2015) ECOSOC Dialogue on the Longer-Term Positioning of The UN Development System. In United Nations Development Global Policy (2017) 8:Suppl.5