Discussion paper
This discussion paper examines the growing focus on ensuring that local and national actors can access overhead funding as part of wider humanitarian reform efforts. Locally led humanitarian response is increasingly recognised as more effective and efficient, and as strengthening accountability to and participation of people affected by crisis. In this context, overheads—also referred to as indirect costs or indirect cost recovery (ICR)—are critical to building the organisational capacity, sustainability and preparedness of frontline responders. When overheads are not provided, local actors are less able to respond to the growing complexity of humanitarian crises, particularly in protracted and high-risk contexts.
Against this backdrop of evolving standards and commitments, the paper situates itself within ongoing sector-wide reflection on funding practices. It responds in particular to the Inter-Agency Standing Committee (IASC) Guidance on the Provision of Overheads to Local and National Partners, published in November 2022, and related discussions within the IASC Task Force on Localisation and the Grand Bargain caucus on funding for localisation.
The paper supports these reform processes by summarising current donor indirect cost policies and perspectives on overhead allocation to local and national actors. It identifies key opportunities and barriers to change, drawing on interviews with 12 bilateral donor representatives and additional insights from private foundations. The analysis is intended to complement earlier mapping of intermediary practices and to inform practical steps toward fairer and more sustainable funding arrangements for local and national partners.
