Cost-effectiveness-of-Passporting
CHS audit passporting: an effective and practical way to ease the burden of duplicative due diligence assessments on local responders
As part of the LOCAL project*, HQAI conducted a study to evaluate the cost-effectiveness of multiple individual due diligence assessments (DDA) versus the use of a single CHS audit process to inform multiple due diligence and capacity assessments - an approach known as passporting - from the perspective of three local NGOs.
*The Lowering Compliance Burdens for Local and National Associations (LoCAL) project, led by DRC with HQAI and SPONG is co-funded by the European Union.
In addition to continuous improvement and long-term capacity strengthening, CHS audits carry another, indirect advantage: validated CHS audit data can objectively inform identified levels (50-100%) of various donor due diligence or partner capacity assessments.
For national and local actors (LNAs), this could be a gamechanger. The duplication of due diligence assessments is a well-documented, persistent barrier to locally led aid that places a significant administrative and operational burden on LNAs and diverts critical resources away from programme delivery and affected people.
In practice, passporting enables donors and intermediaries to build on existing assurance rather than repeatedly collecting the same information from local partners. Any robust assessment can potentially serve as the basis for passporting. This study focuses on CHS audits because they provide an independent, recognised and comprehensive source of organisational assurance.
The study draws on data from three Burkinabè LNAs that recently underwent a CHS audit. Data collected through interviews covers workload and direct costs (real or hypothetical) associated with CHS audits and multiple due diligence assessments (DDA) requested by donors and intermediaries. While limited in scope and based on a small dataset, the study provides initial quantitative evidence on the burden that repetitive DDAs place on LNAs and on the potential of passporting as a practical, cost-effective solution.
Time-efficiency
The study finds that, taken individually, one due diligence assessment (DDA) is less resource-intensive than one CHS audit. However, the challenge with DDAs lies in repetition. Participating organisations reported undergoing 3–5 due diligence assessments per year and this is when passporting becomes particularly time-efficient:
For an organisation conducting five due diligence assessments per year, passporting could save approximately 50 working days over three years, equivalent to 2.5 months of a full-time staff member.
These resources could instead be redirected towards programme implementation, quality improvement and engagement with affected communities.
Cost-effectiveness
The study shows that the cost-effectiveness of passporting depends largely on how the initial CHS audit is financed. When LNAs are expected to bear the full cost themselves, CHS audit passporting becomes financially advantageous after a relatively high number of repeated DDAs over a three-year cycle (13 to 19). However,
when initial audit costs are covered by donor funding, capacity-strengthening budgets or dedicated mechanisms, passporting becomes significantly more cost-effective for LNAs.
The break-even point is reached within the range of 3–5 DDAs per year.
It is important to note that the analysis only captures costs borne by LNAs; it does not account for the costs borne by donors and intermediaries when conducting DDAs. While beyond the scope of this study, the true cost of duplicative due diligence is likely considerably higher than what L/NGOs absorb alone, hence the potential for efficiency gains across the aid system is substantially greater.
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