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Following the Money in Humanitarian Aid Supply Chains

Inside the complex world of disaster relief supply chains.

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When a Category 5 hurricane hits Mexico, a tsunami rocks Indonesia, or a crisis boils over in a conflict zone, Americans are quick to send donations to Christian humanitarian nonprofits for emergency response efforts. But where does the money go? How much serves third-party businesses involved in the operation, whether it’s buying local Facebook ads to spread the word or contracting mechanics to fix a faulty wheel in an aid truck?

An infant in Turkey receives care in a field hospital after an earthquake. Photo via Samaritan’s Purse

In these cases, a small portion of the ministry’s expenditures might serve the profit margins of the intervening parties. Enter the concept of margin stacking, a business phenomenon wherein the accumulation of costs from contractors/subcontractors increases the overall cost of services/goods moving through the chain.

Complex supply chains are necessary, even inevitable, for major humanitarian operations. Calvin Edwards, who advises charitable and faith-based organizations through his eponymous consulting firm, notes that margin stacking is more likely to appear in nonprofits’ analog to true commercial supply chains, where medical, food, or other supplies are gathered in the U.S., shipped abroad, given to local distributors, and ultimately provided to consumers.

“I think in some instances this is an inefficient process, though possibly quite good in others,” Edwards said. “In the medical supplies case, such a ‘chain’ is likely necessary. The organization that gathers pharmaceuticals in the U.S. and deals with all the related government regulations, is likely not an expert in getting them to the right place in Africa.”

MinistryWatch was curious whether relief ministries run these processes in-house or outsource to third parties that might take a cut. We also wanted to know how they monitor the use of resources to avoid inefficiencies across aid sites. We posed these questions to the largest humanitarian ministries in the U.S.

Sector-leading Samaritan’s Purse, for one, is well-known for dispatching its own cargo infrastructure in global crises. It pre-positions supplies in strategically located warehouses worldwide to respond quickly in emergencies, and it operates its own aircraft, a Douglas DC-8 and a Boeing 757, which airlifted nearly 400 tons last year. A spokesperson told us that when Samaritan’s Purse needs to use third-party contractors, it tries to engage directly with manufacturers and avoid retailers and even wholesalers where possible.

Photo via Samaritan’s Purse

The spokesperson added, “The ministry is constantly monitoring prices, periodically soliciting bids for products and services, and researching the market prices of goods.”

Another aid giant, World Vision, mobilizes its regional staff members to assess needs within the first few hours of a disaster. In about three hours, its pre-positioned supplies are typically transported and distributed from regional warehouses. Cynthia Colin, senior director of public engagement at World Vision, says the ministry limits third-party contracts and instead focuses on partners with a demonstrated value-add to its mission over time.

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“We minimize the use of intermediaries in buying goods or services to avoid margin stacking and bid out services to ensure competitive/market pricing,” Colin stated. “World Vision sends out requests for proposals to qualified vendors when looking to purchase goods and services above a certain dollar amount.”

Still, intermediaries are necessary in some situations. Colin cited examples such as working with temp agencies to fulfill a critical staffing need or hiring a global research firm to conduct a multi-country assessment of the impact of its work that may subcontract with local evaluators to complete detailed field assessments in each country.

Compassion International is another leading humanitarian ministry, but it has a different model than direct-relief organizations like Samaritan’s Purse. The Colorado-headquartered ministry mainly delivers monetary assistance to over 8,500 local church partners. Although its primary focus is child development, Compassion sometimes mobilizes its partner network when disasters impact children and families. In those situations, it tries to keep operations in-house.

“Historically, Compassion has delivered assistance using in-house resources with limited third-party partnerships,” the finance team told us. “We’re exploring the possibilities around a broader use of strategic partnerships in the future.”

Monitoring the Use of Cash and Non-Cash Assistance

One aspect of the humanitarian supply chain involves distributing non-cash grants, such as food and medical supplies, among regional nonprofit partners or intra-organizational offices. Margin stacking isn’t necessarily relevant here, but ministries still have a duty to ensure donor funds are spent for their intended purpose.

World Vision, for example, requires all non-cash grant recipients to complete training on logistics, reporting, and inventory management. Its latest Form 990 tax filing indicates that in 2021, more than 340 U.S. domestic organizations received $147.7 million in grants (mostly non-cash) exceeding $5,000 each. The ministry separately awarded about $940 million to 91 foreign charities for relief and development work, along with independently organized World Vision International offices.

World Vision says the required training isn’t outsourced to third parties. “Staff members conduct this training by using internally developed materials based on our experience,” Colin adds. “Regarding logistics and inventory, the training provides industry best practices on various topics related to safe transportation, physical handling, and management of non-cash items.”

Samaritan’s Purse says its largest areas of non-cash assistance are Operation Christmas Child shoebox gifts, mission hospital equipment and supplies, and food distributions. Its latest Form 990 shows it awarded $19 million in grants and non-cash support to more than 140 domestic organizations in 2022, mostly categorized as emergency relief or medical aid. Outside the U.S., it distributed $355 million to foreign organizations, including funding for 24 international offices with 4,028 employees, agents, or regional independent contractors.

The organization sends medical equipment and supplies to a network of mission hospitals, and its World Medical Mission team regularly visits these facilities to determine needs and observe the equipment in use. Short-term volunteer medical professionals also report on equipment and supplies. Beyond that, food distributions—a combination of purchased and donated food for sites like refugee camps—are staffed by Samaritan’s Purse, beneficiaries are tracked, and monitoring is ongoing.

“While we do have robust systems in place for monitoring and evaluation for our field office and some partner projects, we typically monitor the actual distributions rather than how beneficiaries use the non-cash assistance,” a Samaritan’s Purse spokesperson said. “When providing non-cash assistance to international partners, we evaluate reporting received from partners when considering whether or not to provide additional assistance.”

Compassion International’s finance team says that while the organization mainly provides monetary assistance instead of non-cash items, it still requires monthly reporting from local church partners and follow-up accountability on the use of funds for targeted response programs.

Things Donors Should Keep in Mind

Given the complexity of aid relief supply chains, donors should be aware that ministries may work with third-party contractors for some needs, but they mainly partner with other nonprofits.

Beyond that, all nonprofits have non-programmatic costs. Donors should always do their due diligence to consider whether administrative expenses are reasonably budgeted. Most ministries post an expense breakdown on their websites.

For example, Samaritan’s Purse says it spends 7.25% on general/administrative costs, 6.9% on fundraising, and 85.8% on ministry work. Nearly 90% of World Vision’s operating expenses are spent on programs, while 3% goes to management/general and 8% to fundraising.

Donors can also reference ministries’ annual Form 990s for statistics on their contracting activities. In 2022, Samaritan’s Purse worked with 46 independent contractors who received over $100,000 each. Three of the top five highest-paid names were IT service providers:

World Vision’s 2021 Form 990 indicates that while it worked with 88 contractors in total, the top-paid ones provided advertising/media and freight logistics services for the organization:

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Shannon Cuthrell

Shannon Cuthrell is a journalist with a background covering business, technology and economic development. She has written for Business North Carolina magazine, WRAL TechWire, Charlotte Inno and EE Power, among other publications.