practical approaches to managing international development projects in the face of complexity:...
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SESSION 7 : FINANCE 1 , BUDGETING
EMANUEL SOUVAIRANMARCH 2014
Practical Approaches to Managing International Development Projects in the
Face of Complexity
T H I S P R E S E N T A T I O N W I L L B E M A D E A V A I L A B L E T O S T U D E N T S V I A S L I D E S H A R E
Budgeting
What is a Budget for?
Planning A budget is necessary for planning a new project, so that managers can build
up an accurate idea of the project’s cost. This allows them to work out if they have the money to complete the project and if they are making the best use of the funds they have available.
Fundraising The budget is a critical part of any negotiation with donors. The budget sets
out in detail what the NGO will do with a grant, including what the money will be spent on, and what results will be achieved.
Project implementation An accurate budget is needed to control the project, once it has been started.
The most important tool for on-going monitoring is comparing the actual costs against the budgeted costs. Without an accurate budget, this is impossible. Because plans sometimes change, it may be necessary to review the budget after a project has started.
Monitoring and evaluation The budget is used as a tool for evaluating the success of the project, when it
is finished. It helps to answer the question: ‘Did the project achieve what it set out to achieve?’
1. THE INCOME AND EXPENDITURE BUDGET
2. THE CAPITAL BUDGET 3. THE CASHFLOW FORECAST
Three main types of budget
T H I S I S A S P E C I A L F O R M O F Z E R O - B A S E B U D G E T I N G A N D I S F R E Q U E N T LY U S E D I N T H E N G O S E C T O R T O C R E AT E P R O J E C T B U D G E T S A N D I S FAV O U R E D B Y M A N Y D O N O R S .
Z E R O - B A S E B U D G E T I N G ( O R Z B B ) I G N O R E S P R E V I O U S E X P E R I E N C E A N D S TA R T S W I T H N E X T Y E A R ’ S TA R G E T S A N D A C T I V I T I E S . Z B B R E Q U I R E S T H E W R I T E R O F T H E B U D G E T T O J U S T I F Y A L L T H E R E S O U R C E R E Q U I R E M E N T S .
T H I S P R O C E S S M A Y S U I T O R G A N I S AT I O N S G O I N G T H R O U G H A P E R I O D O F R A P I D C H A N G E A N D T H O S E , L I K E N G O S , W H O S E I N C O M E I S A C T I V I T Y- B A S E D . Z E R O -B A S E D B U D G E T S A R E S A I D T O B E M O R E A C C U R AT E S I N C E T H E Y A R E B A S E D O N T H E D E TA I L O F P L A N N E D A C T I V I T I E S . H O W E V E R , T H E A P P R O A C H D O E S I M P O S E A M U C H G R E AT E R W O R K L O A D O N M A N A G E R S T H A N I N C R E M E N TA L B U D G E T I N G .
Activity based budgeting
W R I T I N G A B U D G E T I N V O LV E S A N S W E R I N G A N U M B E R O F Q U E S T I O N S , T H AT C A N O N LY B E A N S W E R E D B Y P R O G R A M M E S TA F F A N D F I N A N C E S TA F F W O R K I N G T O G E T H E R : T H E Y S TA R T W I T H P L A N S A N D G O A L S , N O T N U M B E R S :
1. W H AT O B J E C T I V E S A R E W E T R Y I N G T O A C H I E V E ?2. W H AT A C T I V I T I E S W I L L B E I N V O LV E D I N A C H I E V I N G T H E S E
O B J E C T I V E S ?3. W H AT R E S O U R C E S W I L L W E N E E D T O C A R R Y O U T T H E S E
A C T I V I T I E S ?4. W H AT W I L L T H E S E R E S O U R C E S C O S T ?5. W H E R E W I L L T H E F U N D S C O M E F R O M ? W H AT W I L L
T H E S O U R C E B E ?6. I S T H E R E S U LT R E A L I S T I C ?
T H I S M I G H T L O O K L I K E H A R D W O R K , B U T W E A C T U A L LY W O R K T H R O U G H T H E S E Q U E S T I O N S E V E R Y D A Y, W H E N W E H A N D L E O U R O W N P E R S O N A L M O N E Y. . .
Writing a budget
T H E E X T R A C T D E S C R I B E S T H E I N P U T S N E E D E D F O R A 4 - D A Y W O R K S H O P F O R 2 0 PA R T I C I PA N T S W I T H T W O T U T O R S . T H E TA B L E D E TA I L S I T E M S R E Q U I R E D F O R T H E W O R K S H O P, T H E Q U A N T I T Y A N D T H E C O S T P E R U N I T. T H E F I N A L C O LU M N P R O V I D E S T H E B U D G E T F O R E A C H I T E M .
Using a budget worksheet
Budget worksheet columns
Choosing unit types...
Take care with contingencies
T RY T O AVO I D A D D I N G A ‘ B O T T O M L I N E ’ P E R C E N TA G E F O R S O - C A L L E D ‘ C O N T I N G E N C I E S ’ O N T H E O V E R A L L B U D G E T. G E N E R A L LY, D O N O R S D O N O T L I K E T O S E E T H I S A N D I T I S N O T A N A C C U R AT E WAY O F C A L C U L AT I N G A B U D G E T.
I T I S B E T T E R T O C A L C U L AT E A N D I N C LU D E A C O N T I N G E N C Y A M O U N T F O R S E PA R AT E I T E M S I N T H E B U D G E T – E . G . A S A L A R I E S C O N T I N G E N C Y O R F U E L C O N T I N G E N C Y, I F N E E D E D.
R E M E M B E R T H AT E V E RY I T E M I N Y O U R B U D G E T M U S T B E J U S T I F I A B L E – A D D I N G A P E R C E N TA G E O N T H E B O T T O M I S D I F F I C U LT T O J U S T I F Y – A N D A L S O D I F F I C U LT T O M O N I T O R .
D O N ’ T F O R G E T T H E F O R G O T T E N C O S T S ! T H E R E I S A T E N D E N C Y I N N G O S T O U N D E R - E S T I M AT E T H E T R U E C O S T S F O R F E A R O F N O T G E T T I N G A P R O J E C T F U N D E D . H E R E A R E S O M E O F T H E M O S T O F T E N O V E R L O O K E D C O S T S :• S TA F F R E L AT E D C O S T S ( E . G . R E C R U I T M E N T C O S T S ,
T R A I N I N G , B E N E F I T S A N D S TAT U T O R Y PA Y M E N T S )• S TA R T- U P C O S T S ( E . G . P U B L I C I T Y )• O V E R H E A D O R C O R E C O S T S ( E . G . R E N T, I N S U R A N C E ,
U T I L I T I E S )• T R A N S P O R T C O S T S ( E . G . M O V I N G G O O D S A R O U N D
T H E C O U N T R Y )• V E H I C L E R U N N I N G C O S T S• E Q U I P M E N T M A I N T E N A N C E ( E . G . F O R
P H O T O C O P I E R S A N D C O M P U T E R S )• G O V E R N A N C E C O S T S ( E . G . B O A R D M E E T I N G S , A G M )• A U D I T F E E SI F Y O U D O N ’ T I N C LU D E T H E M I N T H E B U D G E T, T H E N Y O U M A Y N O T H AV E E N O U G H F U N D S T O PA Y F O R T H E M !
Forgotten costs
FI ND YOURSELF A ‘BUDGET BUDDY’ TO CHECK YOUR DRAFT BUDGET WITH A
CRI T I CAL EYE . THI S COULD BE A WORK COLLEAGUE OR SOMEONE DOING A S IMILAR
ROLE IN ANOTHER NGO.
Ask for help!
• T H E P E R S O N W I T H T H E R E S P O N S I B I L I T Y F O R I M P L E M E N T I N G A B U D G E T I S C A L L E D A ‘ B U D G E T H O L D E R ’ , A N D I S U S U A L LY A P R O G R A M M E O R P R O J E C T M A N A G E R , N O T A F I N A N C E P E R S O N..
• T H E Y U S E T H E B U D G E T T O G U I D E T H E I M P L E M E N TAT I O N, C H E C K I N G B E F O R E S P E N D I N G T H AT I T E M S A R E B U D G E T E D F O R , A N D A L L O C AT I N G E X P E N D I T U R E T O A P P R O P R I AT E B U D G E T L I N E S .
• B U D G E T H O L D E R S S H O U L D F O C U S O N D E L I V E R I N G T H E P R O J E C T O B J E C T I V E S W I T H I N T H E T O TA L B U D G E T R AT H E R T H A N O N S P E N D I N G A L L T H E C A S H O U T L I N E D I N T H E B U D G E T.
• O V E R O R U N D E R S P E N D I N G W I T H I N R E A S O N A B L E L I M I T S I S N O T A P R O B L E M A S L O N G A S T H E R E A R E G O O D E X P L A N AT I O N S ( B U T C H E C K Y O U R G R A N T C O N D I T I O N S , A S S O M E C A N B E M O R E R E S T R I C T I V E T H A N O T H E R S ) .
Implementing the budget
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