Budget Allocation and Financing
Leonellha Barreto Dillon, seecon gmbh
Budget and Financial Issues
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The contents of the SSWM Toolbox reflect the opinions of the respective authors and not necessarily the official opinion of the funding or
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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
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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
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Typical categories may be, for example:
● people
● travel costs
● vehicles
● equipment
● consumables and supplies
● Sub-contracts
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SOURCE: L. Barreto Dillon
Budget and Financial Issues
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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.
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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.
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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.
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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
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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).
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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.
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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 and according to the rules of an
external organisation. If the issue of long term financial viability has not been
taken into consideration:
many projects may collapse once the external finances are no
longer available!
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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.
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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.
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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.
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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.
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Sources of Funding
External Funding: Private Foundations
Ford Foundation [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
groundwater.
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 [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
and emergency relief.
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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-methodologicalnote-sanitation-wsp-en.pdf
[Accessed on 16.05.2010]
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Water Management & Agriculture”
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