Transcript Slide 1
Budget Allocation and Financing
Leonellha Barreto Dillon, seecon gmbh
Budget and Financial Issues
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Depending on the initial situations and respective local circumstances, there is no guarantee that single measures described in the toolbox will make the local water and sanitation system more sustainable. The main aim of the SSWM Toolbox is to be a reference tool to provide ideas for improving the local water and sanitation situation in a sustainable manner. Results depend largely on the respective situation and the implementation and combination of the measures described. An in-depth analysis of respective advantages and disadvantages and the suitability of the measure is necessary in every single case. We do not assume any responsibility for and make no warranty with respect to the results that may be obtained from the use of the information provided.
Budget and Financial Issues
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Budget Allocation and Resource Planning
A budget is defined as patterns of expenditure and revenue over the life of the project (SEAGA 2001).
Realistic planning of finances is key to the implementation of a project or program.
Generally, the budget has mainly two functions (UNIVERSITY OF VIRGINIA, 2010): 1. it estimates, as realistically as possible, the cost of completing the objectives identified in the project proposal. 2. It provides a means to monitor the project's financial activities over the life of the project. Budget and Financial Issues 3
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Typical categories may be, for example: ● people ● travel costs ● vehicles ● equipment ● consumables and supplies ● Sub-contracts Budget and Financial Issues 4
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Budget and Financial Issues SOURCE: L. Barreto Dillon 5
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Direct costs
Typical Direct costs are (EC 2009): ● Personnel costs : they should reflect the total remuneration, including salaries plus social security charges ● Travel and subsistence allowances : round-trip airfare, lodging and meals, taxis, visa, etc. ● Vehicles : usually this cost will be included in the travel and subsistence item. ● Durable equipment : any item which will retain its usefulness beyond the grant period is considered capital equipment. ● Consumables and supplies : stationery, duplicating supplies, typing/computing supplies, and software.
Budget and Financial Issues 6
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Indirect costs
Indirect costs, also called overheads, F&A and Facilities & Administrative Costs, typically are costs of (EC 2009): • operating and maintaining buildings (electricity/gas/water bills), • grounds and equipment, • depreciation, • general and departmental administrative salaries and expenses • library costs. Budget and Financial Issues 7
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Budget Allocation and Resource Planning: More tips!
It is important that the budget is
realistic
.
Before preparing a budget, determine what would be an
appropriate amount
to request. The numbers should be
specific
. Your planning should allow for
contingencies
. Some donors require that some
part of the cost
of a project be borne by the applicant institution.
Budget and Financial Issues 8
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Sources of Funding
Beneficiaries contribution
Stakeholders might be willing to invest some of their own resources.
Many financing approaches : cost-sharing model that encourages users to contribute for the services that they have chosen as best meeting their needs. household invests in its own facilities and pays directly for operating and maintenance costs tariffs paid to service provider (connection charges, volumetric tariff, etc).
cross-subsidies between rich and poor users or existing and new customers Budget and Financial Issues 9
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Sources of Funding
Government Budget
Ideally, funding for most of the actions in a water and sanitation projects should come from the Government’s own resources. The type of financing mechanisms included in this type of source are: (1)a percentage of
public subsidy
for hardware or software, (2)subsidised
credit to end-beneficiaries
for investment in their own infrastructure,
(3)subsidised loans
to service providers (public or private) (4)community-level
rewards
(e.g. grants to local govt). Budget and Financial Issues 10
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Sources of Funding
Private Participation
Public-private partnership (PPP) describes a government service or private business venture which is funded and operated through a partnership of government and one or more private sector companies (PPIAF 2010). In water and sanitation: build-operate-transfer (BOT) or BOO (Build – Own – Operate) projects In these cases, the private parties invest their capital only in the construction of the infrastructure. Budget and Financial Issues 11
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Sources of Funding
External Funding
The need for external funding arises when none of the above approaches would be feasible. Source: PHILIP et al 2008 However, it should always be kept in mind that tapping external sources usually means
financing for a limited period of time
taken into consideration: and according to the rules of an external organisation. If the issue of long term financial viability has not been
many projects may collapse once the external finances are no longer available!
Budget and Financial Issues 12
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Sources of Funding
External Funding: International Donor Organisations
Some examples are (adapted from SONI 2005) :
Asian Development Bank (ADB)
[www.adb.org/Water/default.asp].
ADB promotes stakeholders participation in the management of water resources at all levels. It encourages partnerships between governments, private agencies, NGOs, and communities.
Australian Aid Agency (AUSAID)
[http://www.ausaid.gov.au/country/post/india.cfm] AUSAID delivers aid to Asian countries in the sector including water and environmental sanitation.
Budget and Financial Issues 13
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Sources of Funding
External Funding: International Donor Organisations Danish International Development Agency(DANIDA)
[http://www.danidadevforum. um.dk/en] A key area for assistance is water and sanitation, with focus on ground water based rural water supply systems.
Delegation of European Commission
[http://ec.europa.eu/external_relations/delegations/web_en.htm] EC supports programmes for rural and natural resources development including integrated watershed management. Though a large part of the assistance is channelled to government implemented bilateral programmes, projects undertaken by NGOs are also supported.
Budget and Financial Issues 14
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Sources of Funding
External Funding: International Donor Organisations UK Department for International Development (DfID)
[http://www.dfid.gov.uk/] DFID’s partners include members of the government, private sector, NGOs, civil society and the research community. One of the priority areas is promoting increased investment in clean water.
German Development Cooperation (GTZ)
[www.gtz.de/en] GTZ technical and financial assistance for protection and sustainability of natural resources including watershed protection and sanitation.
Budget and Financial Issues 15
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Sources of Funding
External Funding: International Donor Organisations United Nations Children's Fund (UNICEF)
[www.unicef.org] UNICEF supports developing and implementing a range of replicable models for water and sanitation sector.
US Agency for International Development (USAID)
[www.usaid.gov] One of the key focuses is the link between dependable electricity supply and water conservation.
The World Bank
[www.worldbank.org].
The World Bank is partnering with various organisations to reduce poverty and improve living standards. Among the focus areas is infrastructure development which includes water and sanitation sector.
Budget and Financial Issues 16
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Sources of Funding
External Funding: Private Foundations Ford Foundation
groundwater.
[http://www.fordfound.org] Focuses on rural development, including assisting efforts to improve the management of both large-and small-scale irrigation facilities using pumped
Small Grants Programme of the Global Environment Facility
(SGP-GEF) [http://sgp.undp.org/ Provides grants to NGOs, CBOs and other for projects that benefit the global environment and promote sustainable livelihoods in local communities, including water conservation projects.
Bill and Melinda Gates Foundation
and emergency relief.
[www.gatesfoundation.org] The Global Development Program leadership team oversees the foundation's work in developing countries on agricultural development, financial services for the poor Budget and Financial Issues 17
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References
EUROPEAN COMMISSION (2009): Guide to Financial Issues relating to FP7 Indirect Actions. Seventh Framework Programme. URL: ftp://ftp.cordis.europa.eu/pub/fp7/docs/financialguide_en.pdf
[Accessed: 08.05.2010] METHOD123 (2003): Project Management Guidebook. URL: www.method123.com. [Accessed: 20.05.2010] NEBIU, B. (2002): Developing Skills of NGOs, Project Proposal Writing. Szentendre: The Regional Environmental Centre for Central and Eastern Europe. URL: http://documents.rec.org/publications/ProposalWriting.pdf
[Accessed: 07.08.2010] NETSSAF (2008): The NETSSAF Participatory Planning Approach. A Tutorial for Sustainable Sanitation. URL: http://www.netssaftutorial.com [Accessed: 14.05.2010] PHILIP, R., ANTON, B., BONJEAN, M., BROMLEY, J., COX, D., SMITS, S., SULLIVAN, C. A., VAN NIEKERK, K., CHONGUIÇA, E., MONGGAE, F., NYAGWAMBO, L., PULE, R., BERRAONDO LÓPEZ, M. (2008): Local Government and Integrated Water Resources Management (IWRM) Part III: Engaging in IWRM – Practical Steps and Tools for Local Governments. Freiburg: ICLEI European Secretariat GmbH.
PPIAF –PUBLIC-PRIVATE INFRASTRUCTURE ADVISORY FACILITY- (2010): What are Public-Private Partnerships. URL: http://www.ppiaf.org [Accessed on 14.05.2010] SONI, P. (2005): Solution Exchange for WES-NET India. WES-NET India -Water & Environmental Sanitation Network-. URL: http://www.solutionexchange-un.net.in/environment/cr-public/cr-se-wes-29070501-public.pdf
[Accessed on 16.05.2010] TRÈMOLET, S., PEREZ, E. and KOSLKY, P. (2007): WSP Sanitation Financing Study. Methodological Note. URL: http://www.susana.org/images/documents/07-cap-dev/a-material-topic-wg/wg02/tremolet-et-al-2007a-methodological note-sanitation-wsp-en.pdf
[Accessed on 16.05.2010] Budget and Financial Issues
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Budget and Financial Issues
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