From collective responsibility to fragmented finance

When the United Nations was founded in 1945, its financial architecture was conceived as an expression of collective responsibility. Article 17 of the UN Charter assigns the General Assembly authority to approve the Organization’s budget and obliges Member States to bear its expenses as apportioned by the Assembly. Yet the Charter left crucial questions unanswered. It did not specify how financial burdens should be shared equitably, nor did it establish a single, consolidated budgetary framework. As a result, the UN’s financing system evolved incrementally, shaped by political compromise rather than by coherent design.

Early reformers were acutely aware of these shortcomings. Grenville Clark and Louis Sohn, in World Peace Through World Law, proposed a rules-based revenue model grounded in predictable and equitable burden-sharing. Their vision of assessed contributions linked to national income, collected through domestic tax systems and capped at the global level, was politically unrealistic even at the time. Still, their proposal established a powerful conceptual benchmark: a depoliticized funding system capable of sustaining the UN’s expanding mandates while protecting its institutional independence.

By 2023, voluntary earmarked contributions accounted for roughly 81 percent of total UN development and humanitarian assistance.

In practice, the UN initially relied on assessed contributions calculated according to members’ economic capacity. Over time, however, its activities multiplied and its budgetary structure fragmented. Today, the UN operates through several parallel financial streams: the Regular Budget, the Peacekeeping Budget, and the assessed budgets of specialized agencies. Alongside these, voluntary contributions—especially earmarked ones—have grown dramatically and now dominate the system.

The rise of earmarked funding

By 2023, voluntary earmarked contributions accounted for roughly 81 percent of the total UN development and humanitarian assistance. This transformation has had far-reaching consequences. Unlike assessed contributions, which are collectively negotiated and periodically revised, earmarked funding allows donors to direct resources to specific projects, themes, or countries. In doing so, donors gain influence over priorities, timing, and implementation modalities.

The concentration of this funding is striking. A small group of high-income countries provides the majority of earmarked contributions, giving them disproportionate agenda-setting power within a system that formally rests on the principle of one-country-one-vote. The resulting tension is structural: political equality in decision-making coexists with extreme inequality in financial leverage.

These dynamics are often defended as pragmatic. Earmarked funding is said to mobilize additional resources, allow donors to demonstrate accountability to domestic constituencies, and support innovation. Yet the growing empirical literature suggests that the costs of earmarking—both visible and hidden—are substantial.

What the evidence tells us

Recent research by Bernhard Reinsberg and collaborators provides the most systematic evidence to date on how earmarked funding affects international organizations, including the UN system. Their findings are notable not only for their scope, but for their consistency across levels of analysis.

At the organizational level, data from the Multilateral Organisation Performance Assessment Network (MOPAN) show a clear pattern: increases in earmarked funding are associated with declines in process performance. A 30 percentage point rise in the share of earmarked funding correlates with a statistically significant deterioration in organizational systems, procedures, and management quality. Crucially, this erosion affects how organizations function, even when headline output indicators remain stable.

At the project level, evaluations of thousands of development projects reveal a similar trade-off. Projects financed through earmarked funds perform worse, on average, than those financed from core resources. To compensate for this performance gap, earmarked projects would require significantly larger budgets. They also impose higher supervision and reporting costs, reducing the share of resources available for actual implementation.

Earmarked funding often succeeds at generating activity—but performs poorly in terms of outcomes.

At the subnational level, the evidence is particularly sobering. Studies comparing geographically matched areas show that core-funded projects are substantially more effective at generating local economic growth and improving human development outcomes than earmarked projects. In the case of UNDP, core funding is associated with measurable improvements in the Human Development Index, while earmarked funding shows no comparable effect.

Why earmarking underperforms

These outcomes are not accidental. Earmarked funding alters incentives in ways that systematically undermine effectiveness.

First, it distorts program priorities. Donor-driven activities tend to align less closely with organizational mandates and comparative advantages. Agencies spend more time responding to donor preferences and less time pursuing coherent, long-term strategies grounded in their expertise. While earmarked funding can sometimes promote innovation, it often limits the flexibility that organizations need to alleviate the most severe needs.

Second, earmarking raises transaction costs. Negotiating, managing, and reporting on multiple donor-specific funding streams absorbs staff time and administrative capacity. These costs are rarely visible in aggregate budgets, but they erode institutional effectiveness from within.

Third, earmarking weakens recipient-country ownership. Projects shaped primarily by donor priorities are less aligned with local needs and national development strategies. This undermines sustainability and reduces the likelihood that interventions will deliver durable results.

The paradox is that earmarked funding often succeeds at generating activity—what organizations do—but performs poorly in terms of how well they do it and what they ultimately achieve.

Why reform cannot wait

None of this implies that earmarked funding should be eliminated overnight, nor that official development assistance channeled through the UN should be discouraged. The deeper issue is balance. A system in which the majority of resources are tied to donor-controlled earmarks is structurally ill-suited to deliver on the UN’s increasingly complex mandates.

This problem is compounded by broader weaknesses in UN financing. Chronic arrears, periodic liquidity crises, and the politicization of assessed contributions have repeatedly hampered the Organization’s ability to plan and act. Large contributors have at times used financial leverage as a political instrument, while smaller states—despite holding the majority of votes—contribute only a small fraction of total resources. The result is a system that is neither stable nor credible.

Addressing earmarked funding is therefore not a substitute for comprehensive reform of UN financing. It is a necessary complement. A strengthened UN—one with expanded responsibilities in peace, development, climate, and global risk management—will require reliable, predictable, and politically insulated sources of funding. Excessive earmarking undermines all three.

A pragmatic path forward

There is no shortage of practical proposals. Member States could be encouraged to increase the share of core, unearmarked contributions, while shifting remaining earmarking away from rigid project-level controls toward thematic or pooled mechanisms aligned with General Assembly–approved frameworks. Multi-partner trust funds, multi-year compacts, and enhanced transparency tools can preserve accountability while restoring flexibility.

Equally important are incentives. Greater visibility for core contributions, improved reporting, and clearer links between flexible funding and impact can make unearmarked resources more attractive to donors. The UN itself must also invest more institutional capital in managing pooled funds effectively; signaling that flexibility will be rewarded with performance. Finally, the UN should not shy away from rule changes in governance and coordination structures, and the selection of senior leaders and staff.

Conclusion: fixing the system, not just the symptoms

Earmarked funding has become the dominant feature of UN finance, yet it was never designed to carry such weight. The evidence is now clear that, beyond a certain point, earmarking weakens institutions, reduces effectiveness, and undermines the very goals donors seek to advance.

Reforming earmarked funding will not, by itself, solve the UN’s financial challenges. In fact, reforming the funding model and modernizing governance are two sides of the same coin; one cannot succeed without the other. A sustainable UN financing system requires a mutual compact where the UN meets major funders half-way to elicit a return to core support. In exchange for this shift away from earmarking, the UN must ensure a robust governance framework that empowers donors and partners to advance rules and strategic priorities through formal governing bodies. Ultimately, rebalancing the role of earmarked funding is not just a financial necessity, but a prerequisite for a credible system of collective decision-making and institutional autonomy.