ICRC staff call for audit amid acute financial crisis

The International Committee of the Red Cross (ICRC) went into official crisis management mode last week. The organisation decided to cut its budget by CHF 440 million due to deep funding shortfalls, only three months after adopting the highest budget in its history, at CHF2.79 billion.

In a video released internally this week, ICRC director general Robert Mardini said he was “truly sorry” for the “painful” situation the organisation was going through. The ICRC assembly, the supreme body of the organisation founded in 1863 by Henry Dunant, was due to vote Thursday at a special session on cost-savings measures.

It has been a bitter pill to swallow for those within the institution that is a symbol of international Geneva and the Swiss humanitarian tradition. In an open letter addressed to Mardini on 17 March, nearly 2,500 employees, including some anonymously, wrote that they were “dismayed by the brutal budget cuts”. The message from management showed a “clear lack of anticipation”, when it should have been  “transparent and intelligible”, contain “a mea minima culpa” and show some “humility”, the letter read.

Mardini said on 7 March in an interview with Le Temps that the ICRC would need to raise CHF500 to 700 million from donors to cover its operations in 2023. In an email from the same date, the director general said field operations will be reduced by CHF400 million – 16 per cent of the budget for its activities in around 100 countries.

In addition, Geneva headquarters will see CHF30 million cut, representing 10 per cent of its budget – and CHF10 million would be reduced from its corporate services.

Le Temps learned that the ICRC also had to increase its line of credit with UBS to replenish its cash flow.

Call for audit

On the ground, managers have been asked to submit savings proposals. These include looking at the possibility of reducing the organisation's presence in certain countries and reviewing the way regional branches are structured, as well as the cost of support and services for delegates around the world.

For the first time in the group’s 160 years, none of the ICRC's ten major humanitarian operations – Ukraine, Nigeria, Afghanistan, Syria, Yemen, South Sudan, Somalia, Iraq, the Democratic Republic of the Congo and Ethiopia – is sufficiently funded.

Meanwhile, over the past ten years, the ICRC’s budget has soared by more than CHF1bn. Questioning this expansion, staff said it would be “imperative” to perform an inventory of activities from 2012 to 2021 to shed light on a “budgetary drift” that did not start today and called for a “clear explanation”.

They suggested conducting an “independent, external and international” audit. During that period, the ICRC was directed by Yves Daccord, current chairman of the board of Le Temps, and presided by Peter Maurer. Mardini succeeded Daccord in 2020, while Mirjana Spoljaric Egger took over from Maurer in September 2022.

According to the employees, this budget expansion, which reflects the growing needs in the field, raises questions about “management’s responsibility amid the unprecedented situation” and its “legitimacy in resolving it”. So far only the amounts in cuts have been announced, without setting “any strategy” or “the main areas on which the ICRC must refocus”.

Mardini said he is working on this, stressing the need to focus on the services in which the ICRC brings “the most value”.

Following the open letter, also disclosed by The New Humanitarian, the staff association committee, Comap, reported on its ensuing discussions with management. The association said it felt the explanations were neither sufficient nor convincing. Comap insisted that the “tactical and immediate” budget cuts should be part of a medium and long-term strategic reorganisation.

Inflation pushing up costs

Robert Mardini had explained to Le Temps that humanitarian needs are rising, but that the desire and capacity of donors to respond to them are dwindling – a trend that started during the health crisis. He added that it was a matter of priorities, with operations in Ukraine overfunded last year, while those in other countries, especially with protracted conflicts, suffered from a lack of attention.

Contacted, the ICRC explained that several funding commitments made at the end of last year did not follow through. Some “major donors”  have reduced their contributions, with the year 2023 starting out with a CHF140 million deficit. As a result, there could be a significant funding gap up until December. The organisation, which employs 20,000 people, could not say at this stage how many jobs would be cut.

Inflation, particularly high in the poorest countries where the organisation operates, is also pushing up the cost of food, energy and medical goods. The hike in prices alone represents CHF160 million in expenses. Despite a budget 0.3 per cent higher than the previous year, the ICRC's “purchasing power” in real terms is expected to decline in 2023.

A calculated risk

The ICRC has a unique funding model in the humanitarian field, based on contributions from state parties to the Geneva Conventions, national Red Cross and Red Crescent societies and other public and private donors. About 90 per cent of its costs are covered by governments. At the beginning of the year, the ICRC launches appeals to cover its expenses based on a pre-agreed budget.

The model, Mardini told the staff, has advantages and disadvantages that lead the organisation to take a “calculated risk” each year. On the one hand, it allows it to deploy funds in January without interrupting its activities, unlike other organisations that begin disbursement only once funding is secured. On the other hand, it feels “immediately” the effects of a partial or total defection of its donors, as is the case today. This is no excuse, Mardini concluded his message, noting that “lessons” must be learned from this situation.

Le Temps has learned that ICRC can anticipate some of these fluctuations, but some of it is always unpredictable. “We are not in uncharted territory, even if the savings to be made are high in terms of value,” a source close to the ICRC said. Most organisations are suffering from the decline in state contributions. Despite inflation, government budgets are stable or have decreased, while allocations to international humanitarian aid from some countries have been under pressure from the influx of refugees.

In 2023, Switzerland’s contribution to the ICRC was stable at CHF80 million. The United States remains its main donor, accounting for around 25 per cent of its budget.