Funding universal service and access projects: Form strategy to impact

C.5     Making and managing disbursements

C.5.1    Overview

Disbursement methods are often informed by policy and regulatory frameworks that the Fund operates which dictate the options of disbursement that the Fund has, and often the timing and form of the disbursement in each financial year. Disbursements come in several forms – grants, subsides and loans amongst them. Most Funds have the authority to issues subsidies and grants, which are the focus of this section.

Box 1: Grants vs Subsidies
Source: https://smallbusiness.chron.com/whats-difference-between-grant-subsidy-39285.html

C.5.2     Issuing of Grants and subsidies

Grants and subsidies are common forms of disbursement applied by Funds. There a few approaches that can be taken to the issuing of grants and subsidies as follows:

• Competitive least cost subsidy – this is a hybrid of competitive bidding and least cost subsidy. The Fund will request that Operators bid competitively for the project implementation, however unlike competitive bidding the consideration is made on the quality of the proposal and the lowest cost that would need to be subsidized by the Fund. The bidders would present the portion that would need to be subsidized by the Fund, and the lowest subsidy that meets the technical quality required would then be awarded the bid. This works best with infrastructure operators and tower companies. While this may work, it is not universally applicable to all projects and all programmes; this approach to disbursement works best with projects such as the following:
  • Large capital projects in network infrastructure
  • Large sums of subsidies to be disbursed
  • Tower Companies as subsidy recipients.

• Non-commercial but competitive grants and smart subsidies: The Fund will stipulate specific guidelines which are aligned to specific targets in the project. This grant has very specific characteristics such as:
• It should be once of;
• It should kick start a project or service with the objective of ultimately seeing the programme become self-sufficient or commercially viable;
• It is designed to encourage cost saving and market growth;
• In addition, like all subsidies, it should:
  • Encourage service provision in areas where, without the grant or subsidy, investors might otherwise have been reluctant to invest;
  • Link the grant or subsidy to optimal results;
  • Be designed to support cost-minimization incentives; and
  • Embody and facilitate good governance[1].

• End user subsidy: this type of subsidy is predominantly used in demand side projects that are designed to subsidies end user products to a specific group of the population such as the elderly, people with disabilities, or schools. These subsidies are usually channeled through contributing operators, where end users can easily register, go through a vetting process and be given end user devices.

In many countries end user subsidies are complex to implement, especially where there is no central data based that can verify the person and the category in which they qualify; such as social grant or biometric ID. 

C.5.3     Grant management

Grant management is a key responsibility of many universal access and service funds. In this context “grant management” in this module is considered  from the perspective of Fund Managers who distribute grants and award funds as opposed to grant seekers who also have grant management responsibilities and obligations. The grant making role involves a variety of deliverables, including

• setting strategic goals, as is often done in the UAS strategy to which the grant making is linked,
• evaluating applicable policy and regulations, including those which define beneficiaries, scope of fund, and project types and
• ultimately awarding grants through various mechanisms.

For the parties that issue grants, such as USAF 2.0, grant management encompasses the processes and administrative work that happen throughout the grant lifecycle. This includes

• setting up the grant,
• reviewing applications from eligible parties,
• selecting recipients,
• disbursing grant funds, and
• monitoring to ensure that the funds are applied correctly

C.5.3.1 The Role of the Fund in managing Grants

A team should be assigned the task of grant management. The key responsibilities of this team would be  twofold – (1) to manage the application process and ensure consistent grant processing, (2) to manage the implementation of grants, i.e. through tracking, and compliance throughout the grant lifecycle. The lifecycle of a grant, which can be broken into three stages: pre-award (application), award, and post-award (M&E). 

Stage one of the lifecycle is Pre-Award which is often associated with the application process. Key tasks that the grant manager must have undertaken in order to successfully execute the “application” stage include:

• naming the grant and linking it to a specific programme or focus area in the institutions broader mandate. In the case of a Fund, the grant should be linked to a specific programme, which is in turn aligned with the Fund Mandate
• establish the grant amount, i.e. how much will be awarded to the successful applicants
• create an application process and the relevant forms to support it
• advertise the grant and issue the applications

Stage two of the lifecycle related to the award. At this point the Fund must decide who the recipient/s of the grant should be. To establish this the Fund Manager has to have done the following:

• established the evaluation criteria
• set up a review or application evaluation team
• assessed the applications, where relevant this could also include an interview process (with reference to good practice procurement principles discussed elsewhere in this module)
• Selected the grant recipient/s
• prepared grant agreements
• disbursed the funds

Finally, in step three, the Fund’s key role is to account for the money that has been disbursed. To do this, the following key tasks need to be done by the Fund Manager:

• establishing reporting requirements and deadlines, and any supporting forms or templates
• monitoring compliance and reviewing reports submitted by the awardees
• preparing reports for the Board and other partners, where applicable
• deciding on whether to continue or close grants at appropriate points in the project

C.5.4     Disbursement principles

Box 2: OECD Public Procurement Principles
Source: OCED Public Procurement Toolkit[2]     

Disbursement processes, whether it is grants issued via application or competitive tendering or end user subsidies should align broadly with many public procurement processes described elsewhere in this Toolkit. Disbursement should therefore be guided by the OECD procurement principles set out in Box 2. Furthermore, specifically, in relation to the issuing of grants and subsidies, in order to ensure effective subsidisation and grant making and management, it is important that a number of key principles are borne in mind.

C. 5.4.1  Scope projects properly

In scoping the projects that should be delivered, it is important to remember: What is your goal? What is your strategy? What is the best way to get there? Will this grant help? A risk is that grants are given for the latest development issues, for example Artificial Intelligence research, when actually the local challenge is school connectivity. Grants have to be well suited to the local context and aligned with the organisational and national strategy.

C.5.4.2  Fund Appropriately

Often, there is a temptation to either spread available resources to as many recipients as possible (spread the funds too thin). Alternatively, a common approach is to give all the available funding to only one or two large projects (over fund). It is therefore critical that the type of projects that may receive grants are clearly understood and scoped. To the extent that Funds are not able to do this, ‘least cost subsidies’ or grants can be issued. In this instance, the Fund can define the outcomes it wishes to see (e.g. 100 schools connected) and the applicant who can provide the outcome at the lowest cost may receive the grant – subject of course to other requirements.

Where a fixed grant is to be issued, then the project should be properly scoped and benchmarked against similar grants and projects, taking into account local factors and costs.

C.5.4.3  Providing several forms of support

The grant or subsidy may be a combination of financial support, which is a given, and support  in terms of governance, advice and referrals for example to partners. It could include access to facilities at a reduced cost. This will enable the Fund to provide more holistic support and use all the tools at its disposal to support the grantee. The total support must, however, be established upfront and written into agreements.

Examples of potential non-financial support might include catalytic support, e.g. using the Fund’s convening power to link the project to partners, or set up workshops and seminars. Leveraging support, which could result in the grant attracting more funding form other types of financiers. Tactical support in specific areas where the fund can provide technical assistance such as facilities, accounting, reporting, and IT.

C.5.4.4 Evaluation and monitor

The biggest risk for the Fund is that the funding does not achieve the desired impact. In accounting terms it will then be considered “fruitless and wasteful expenditure”. In order to avoid this, in addition to carefully selecting the awardee, it is critical that the grant is monitored effectively and that the third stage of the grant management lifecycle is applied. This enables the early identification of issues, and also promotes accountability by the recipient.

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[1] HIPSSA – SADC Toolkit on universal Access Funding and Universal Service Fund Implementation

[2] https://www.oecd.org/governance/procurement/toolbox/principlestools/