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Non-net costs: why we fund them in certain circumstances
First published 01 Feb 2013

Until now AMF has not paid for non-net distribution costs. We have only funded net costs. We will be covering all non-nets costs, including pre-distribution, distribution and post-distribution survey costs for a 235,000 LLIN distribution in Balaka/Dedza districts, Malawi in early 2013. This will allow the distribution to happen quickly given there are no obvious or quick sources of funds for our distribution partner to cover these costs. The funding for non-net costs will NOT come from public donations to AMF. Our promise that '100% of the funds you donate will buy nets' still stands. They will instead be covered by donor/s who have arranged with us to donate for this specific purpose.

We explain here:

Why we have not previously covered non-net costs

There have been five reasons.

First, we have wanted to maintain a clear message to donors: '100% of the funds you donate will buy nets'. This will not change, as we explain below, despite paying for non-net costs for this distribution. We continually receive feedback from donors this is valued and is a powerful factor in them deciding to donate to AMF.

Second, we have not felt AMF is well-placed to evaluate what level of non-nets cost are reasonable. Given our lack of expertise here, we have considered it likely non-net costs might rise versus their level if a distribution partner were funding them themselves.

Third, we believe distribution partner performance is better if they have their own funds invested in a net distribution. In part this is based on a requirement of the distribution partner to report internally or to other contributing funders. We believe this mutual financial contribution, albeit with AMF contributing the majority of the entire cost of the distribution, typically 80-90%, forges a stronger working relationship with a distribution partner.

Fourth, it has meant we can fund more nets due to not having to divert funds to non-net costs.

Fifth, non-net costs have always been found, and quickly, by the distribution partner so there has been no imperative to fund non-net costs.

Why we are funding non-net costs for the Balaka/Dedza, Malawi distribution

When AMF distributions were 20-50,000 nets in size, the $20-50,000 needed for non-net costs, approximately $1 per net to cover all non-net costs, could be found relatively easily. For larger net distributions, of 250,000 nets and more, it is more difficult for distribution partners to find, relatively quickly, the larger sums involved to cover non-nets costs.

AMF funding non-net costs can remove the final barrier to a distribution proceeding and avoid potential lengthy delays of up to a year given the ideal timing of a distribution relative to other events, for example a rainy season.

Malaria is a significant health problem in these two districts and there are health benefits for the population of acting now to achieve universal coverage as soon as possible.

To each of the five reasons listed above, we would comment:

First, public donations will continue to be used exclusively to fund nets. A significant donor has agreed to contribute $500,000 into a separate bank account from which we will disburse funds for non-net costs. This account is separate from our nets account into which all donations from the public are placed and which only purchase nets. We will maintain a clear distinction between these two sources and uses of funds. If we decide at any time funds in the non-net account are not needed for non-net costs, the balance will be transferred to the net account to purchase nets.

Second, we have significant confidence in the distribution partner built on partnering with them for three years and we believe non-net costs will be managed closely and appropriately.

Third, given our experience over three years working with this distribution partner, we do not believe their previous strong performance will reduce as a result of them not covering non-net costs.

Fourth, we will be diverting funds away from nets and to non-net costs but the overall benefit of pressing ahead with the 235,000 net distribution merits this decision.

Fifth, attempts over a number of weeks have been made by the distribution partner to find a different source/s of these funds but this has not been successful. If we had more time we might have been able to do so. Indications are that a six-month lead time might make have made a difference but we had a two month window before we needed to make a decision to proceed to avoid a long delay in starting the distribution.

We will list all non-net funds separately on our website and we will publish all non-net costs in detail so we maintain transparency of these funds.

Why we do not currently expect to cover non-net costs for many, or potentially any, other distributions.

Over the next 12 months we expect to identify distribution partners with whom we have not previously worked. We start out such a partnership looking to develop a relationship that will extend to further distributions in the same or more countries.

We see one of two sources of funding for non-net costs. Either the distribution partner themselves or from a further third party partner who we might approach with the distribution partner.

The distribution partner contributing non-net costs is the best way we believe of ensuring costs are managed closely and appropriately and encouraging strong performance from the distribution partner given a requirement to report internally or to other contributing funders.

A third party contributing non-net costs could be a large well-funded NGO or governing body of a country region or state with malaria activities who could achieve, through partnership with AMF and the distribution partner, their funding for malaria going further. Our offer to such partners would be we will fund the nets - the largest cost element for a distribution - and the distribution partner will take responsibility for the carrying out of the distribution, if they will cover the non-net costs. Some NGOs with malaria activities have plans to fund a range of malaria control activities such as net distribution, malaria drugs, and diagnostic equipment and a lack of funding means most cannot fund all that they wish to. A partnership, with AMF contributing significant funding for nets, could allow their funds to go further. We expect to write more about this in the months ahead with a specific distribution example and numbers.

There is the potential for shared learning and improvement in performance of all such groups partnering in this way and this is an important reason for AMF wishing to pursue these partnerships.

See a breakdown of our current non-nets costs.