Forest Carbon Partnership Facility

FY10 Annual Budget of the Readiness Fund

Participants Committee Meeting (FCPF PC3)Montreux, Switzerland, June 16-18, 2009

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I. The Budget Process of the FCPFReview of FCPF Budgeting Services to REDD Country Participants Secretariat and Trustee FunctionsShared Facility Costs

II. Status of the FY09 BudgetContributions and Cash Flow ProjectionsFY09 Expenditures and Commitments to Date

III. The FY10 Budget ProposalReadiness Fund Challenges and Trade-offsFY10 Budget Proposal and Examples of CostsOptions and FMT RecommendationsPC Decisions

Outline of Today’s Discussion

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Review of FCPF Budgeting Services to REDD Country Participants Secretariat and Trustee Functions Shared Facility Costs

I. The Budget Process of the FCPF

Topics

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• FCPF budgets – for both the Readiness Fund (RF) and Carbon Fund (CF) – are based on the World Bank fiscal year.

• FY09 = July 1, 2008 through June 30, 2009. FY10 begins this July 1.

• Budgets are to be approved annually.

• FY09 Readiness Budget approved in October 2008. No budgets yet for the Carbon Fund.

I. The Budget Process of the FCPF – Review

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• The FY10 Budget of the Readiness Fund is submitted and proposed for approval in this meeting of the PC.

• As part of approval of the RF budget, the PC approves the ‘Shared Costs’ of activities that cut across both the RF and the CF (e.g., the costs of the FCPF Secretariat).

• The Carbon Fund Participants Committee will review and approve the FY10 Annual Budget for the Carbon Fund at October 2009 meeting.

I. The Budget Process of the FCPF – Review

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Country Implementation Support

• Direct implementation support, including technical assistance, from World Bank country teams

• Grant supervision and country level review, related to environmental and social due diligence and other key fiduciary policies of the World Bank

I. The Budget Process of the FCPF – Services to REDD Country Participants

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Country Advisory Services

• FCPF team coordination of, and feedback on R-PINs, R-Plans (R-PPs) and other elements of REDD readiness packages

• General guidance on FCPF social and environmental due diligence

• Preparation of generic terms of reference

• Sharing cross-country experiences and emerging global guidance on REDD with individual REDD Country Participants

I. The Budget Process of the FCPF – Services to REDD Country Participants

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REDD Methodology Support

• Work of independent TAPs in support of FCPF Participants, advancing global topics such as valuation of emission reductions and reference scenarios

• TAP review of R-PINs, R-Plans (R-PPs) and elements of country readiness packages

• TAP travel and participation in FCPF meetings

• Ensuring adequate liaison with global forestry programs, UN REDD and the international teams developing REDD methodologies

• Indigenous Peoples capacity building program on REDD

• Approved contingency

I. The Budget Process of the FCPF – Services to REDD Country Participants

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The FCPF Secretariat

• Overall program management and activities related to maintaining partnerships among the many stakeholders of the FCPF

• Organization of Annual Meeting and approx. three PC Meetings per year

• Travel and expenses of REDD Country Participants in meetings

• Supporting the participation of the Indigenous Peoples’ Observer

• FCPF website and communications

I. The Budget Process of the FCPF – Secretariat and Trustee Functions

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Readiness Fund Administration

Functions related to the World Bank role as Readiness Fund Trustee, including:

• Preparing budgets, business plans and financial projections

• Preparation of the FCPF Annual Report for the October Annual Meeting

• Accounting, financial audits, contributions management and legal services to the Readiness Trust Fund

• Evaluation of Readiness Fund progress

I. The Budget Process of the FCPF – Secretariat and Trustee Functions

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Carbon Fund Administration

• Similar Trustee functions as with the FCPF Readiness Fund• Presented for approval of the Carbon Fund Participants at the

meeting in October

I. The Budget Process of the FCPF – Secretariat and Trustee Functions

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• ‘Shared Costs’ across both the Readiness Fund and Carbon Fund include

• FCPF Secretariat and • REDD Methodology Support

• Consistent with the Charter, the Carbon Fund would assume 35% of these costs over time

• Cost sharing is reflected in the current business plan and FY09 budget

• However, appropriate phasing of the Shared Costs borne by Carbon Fund Participants to be decided in this Meeting.

I. The Budget Process of the FCPF – Shared Facility Costs

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Topics

II. Status of the FY09 Budget

• Review of Contributions and Cash Flow Projections• FY09 Expenditures and Commitments to Date

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II. Status of the FY09 Budget – Review of Contributions

Available Contributions to the Readiness Fund ($m) as of June 8, 2009

  FY09 FY10 FY11 FY12 TotalsAustralia 9.6      9.6Finland 9.0      9.0AFD (France) 4.6 0.4    5.0Japan 5.0 5.0    10.0Netherlands 5.0 5.1 5.1 5.1 20.3Norway 5.0 15.0 10.0  30.0Spain 7.0      7.0Switzerland 8.2      8.2UK   5.7     5.7USA 0.5 4.5    5.0

FY Totals 53.8 35.7 15.1 5.1 109.8

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II. Status of the FY09 Budget – Expenditures and Commitments to Date

When reviewing the FY09 budget and expenditures:• First Readiness Fund budget was very much a projection

• Final FY09 expenditures are not available until July – will be reflected in Annual Report

• However, based on expenses through April, it appears that the FY09 approved budget was a reasonable projection of costs

• FMT does expect an underrun of about 14 percent compared to the original budget, but we have some additional costs that may offset this underrun.

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II. Status of the FY09 Budget – Expenditures and Commitments to Date

When reviewing the FY09 budget and expenditures:• With greater demand for Participation – slower initial roll out of

readiness activities in specific countries

• FMT was strengthened over FY09, but this has taken time; most positions now hired. It also took time to build World Bank country teams, which led to lower initial staff costs

• TAP costs (REDD Methodology Support) have been lower; originally 5 TAPs were planned for FY09, but only 3 organized for R-PIN and R-Plan (R-PP) review.

• Increase in Fund Administration compared to original plan; higher than expected fiduciary costs.

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FY09 Budget (approved by PC) vs. Current Estimated End-Year Expenses

II. Status of the FY09 Budget – Expenditures and Commitments to Date

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Topics

III. FY10 Budget Proposal

• Readiness Fund Challenges and Trade-offs• FY10 Budget Proposal and Examples of Costs• Options and FMT Recommendations• PC Decisions

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Within the Context of FCPF Objectives…• Maximizing the learning potential of this unique partnership • Moving quickly to develop lessons from REDD prior to 2012

What are the Main Challenges and Trade-offs for FY10? • How to handle demand from 37 countries, when the Readiness

Mechanism was planned for 20 countries?• Financing country readiness activities at an adequate level, and with

appropriate mix of services • Balancing the need for immediate funding to support REDD Country

Participants with cash-flow projections and pledged amounts Þfocus of next presentation on Sources/Uses of Funds

III. FY10 Budget Proposal – Challenges and Trade-offs

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FY10 Budget (in 5-year Business Plan)

• Includes two programs already selected by the PC last October – Capacity Building Program for Indigenous Peoples and Contingency ($200K each for 5 years)

III. FY10 Budget Proposal

Expenses by Activity - 5 Year Analysis ('$000)FY09

Estimate FY10 FY11 FY12 FY13 FY14

Country Implementation Support (20+5) 1,139 1,734 1,916 1,678 520 300

FCPF Secretariat1 1,013 1,443 963 997 986 943

Readiness Trust Fund Administration 402 484 508 470 400 377

Country Advisory Services 765 827 848 876 854 851

REDD Methodology Support1 805 1,082 1,109 1,139 1,153 1,010

Total Operating Costs - 5 Year Analysis ('$000) 4,126 5,571 5,344 5,160 3,913 3,482

Footnote 1. Part of the 'Shared Facility Costs' to be shared with the FCPF Carbon Fund as per the Charter. FMT Recommendation on Shared Costs reflected in the numbers. 20

• Closing date of December 31, 2020 requires us to plan some costs for the long term. But many services to REDD Country Participants fit within a 5-7 year time frame and business plan.

• Services to REDD Country Participants, including country grants, are expected to comprise about 87% of total contributions over the long term.

• About 9% of expected contributions of the Readiness Fund will pay for FCPF Secretariat (supporting both the Readiness and Carbon Funds).

• Trust Fund administration of the Readiness Fund will comprise about 4% of expected contributions.

III. FY10 Budget Proposal

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Comparison with FY9-13 Business Plan

• Estimated Expenses for Five Year Business Plan (FY09-13), as of October 2008:

• Current Estimated Expenses for Five Year Business Plan (FY09-13):

• Current Estimated Expenses with FMT Recommended Option:

II. FY10 Budget Proposal

FY09 FY10 FY11 FY12 FY13 Total October 2008 4,064 4,309 4,484 3,924 3,009 19,789

FY09 FY10 FY11 FY12 FY13 TotalJune 2009 4,126 5,571 5,344 5,160 3,913 24,114

FY09 FY10 FY11 FY12 FY13 TotalJune 2009 3,489 5,066 5,344 5,160 3,913 22,972

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Profile of Grants and Services to REDD Country Participants

(Based on Grant Commitments to 20+5 Countries, some support to additional 12 Countries selected in Round 3)

II. FY10 Budget Proposal

Grant Size for first 20 Countries ('$000) 3,600

Implementation Support Received by Country ('$000) 270

Avg. Advisory Services & REDD Methodology Support per Country ('$000) 436

Total FCPF Operational Support per Country for 20 Countries ('$000) 4,306

Total FCPF Operational Support per Country for next 5 Countries ('$000) 906

Total FCPF Operational Support per Country for next 12 Countires ('$000) 436

Total received by ALL Countries ('$000) 95,895

Total received by ALL Countries % 87%

Total Contributions ('$000) 110,000

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Costs Budgeted for Technical Advisory Panels

III. FY10 Budget Proposal – Examples of Expected Costs

• Experience is that fewer days of work per TAP member, at a somewhat lower average rate than planned are required. However, with increased complexity of moving to R-PPs from R-PINs, panels must be larger and more diverse.

• FY09-13 Business Plan included five panels per year in FY09-11 and three per year after that.

• But more likely/updated scenario is that FCPF will need more, continuous support for a longer time period than initial plans; hence the number of panels is now projected steadily at 5 per year over the medium term – decreasing in FY16 to 4 or less per year.

FY09 FY10 FY11 FY12 FY13 FY14 Five Year Total

Previous Plan (25) 465,000 484,530 505,466 279,000 291,160 2,025,156

Revised Plan (37) 478,000 492,340 512,034 532,515 553,816 2,568,70824

Annual Cost of Participants Assembly & Participants Committee Meetings – Increase in Meeting Costs with 37 REDD Participants

III. FY10 Budget Proposal – Examples of Expected Costs

Type of Expense Total AM/PC Total PC

Conference Services $16,249.00 $6,603.00  Interpretation   $9,900.00 $3,300.00  Photocopy fees $1,120.00 $560.00  maintenance/conf room      sound tech      Conference Facilities (IT, Sound Tech, Maintenance) $2,229.00 $743.00  Facility Fee (room charges + security) $3,000.00 $2,000.00     Catering $29,750.00 $18,250.00     Temporary & Admin Support $20,760.00 $13,900.00     

Airfare (REDD Reps + IP Observer) $114,000.00 $33,000.00     

Perdiem (REDD Reps + IP Observer) $15,200.00 $2,640.00 

Hotel (REDD Reps + IP Observer) $38,000.00 $6,600.00         

$233,959.00 $80,993.00

Total Cost for 2PC + 1AM/PC = $395,945.00 37 Countries 25

Ensuring the representation of Forest-Dependent Indigenous Peoples and other Forest Dwellers

III. FY10 Budget Proposal – Examples of Expected Costs

• Travel costs to PA and PC Meetings for IP Observer are included in the Secretariat budget (as per the FCPF Charter)

• A staff assistant position, reporting to the Chair of the UN Permanent Forum on Indigenous Issues (UNPFII) and focused on FCPF and REDD, was approved last October by the PC for the Secretariat budget. Not utilized in FY09, but is included in the FY10 budget.

• FMT views both items as essential to the effective operation of the FCPF

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Options Proposed for Treatment of Shared Costs

As we know, over time 65% of Shared Costs are borne by the RF and 35% by the CF, unless the PC decides otherwise.

In FY10, the FMT proposes three options:

• Option 1: Charging 100 percent of Shared Facility Costs to the Readiness Fund in FY10, and phasing the share to 65 percent from FY11 onwards.

• Option 2: Implementing the 65/35 ratio of Shared Facility Costs immediately in FY10.

• Option 3: A ‘split’ of the above two options, with 100% of Secretariat costs charged to the RF in FY10 and only 65% of the REDD Methodology Spt.

III. The FY10 Budget Proposal – Options and FMT Recommendations

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Recommendations of the FMT

• Given that the Carbon Fund is not Operational during FY09, the FMT recommends that the Readiness Fund finance 100% of the Shared Facility Costs in FY09.

• For FY10, the FMT Recommends Option 3, which ‘splits’ between Option 1 and Option 2 in FY10. This is a net increase of $5-$600,000 in costs in FY10 relative to the option of full (65/35) sharing of costs in FY10.

• Taking into account the options selected by the PC, the FMT recommends approval of the balance of the FY10 Budget as proposed.

III. The FY10 Budget Proposal – Options and FMT Recommendations

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1. PC decision whether to modify the approved FY09 Budget to allow 100% of Shared Costs to be paid by the Readiness Fund

2. PC decision on option for treatment of Shared Costs in FY10

3. Approval of FY10 Annual Budget, taking into account any options selected for Shared Costs

III. The FY10 Budget Proposal – Decisions for the PC

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III. The FY10 Budget Proposal – Decisions for the PC

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Thank you.