A Costing Analysis of a Household Economic Strengthening (HES) Program for Households Caring for Orphans and Vulnerable Children (OVC):

Transcription

1 Boston University OVC-CARE Project A Costing Analysis of a Household Economic Strengthening (HES) Program for Households Caring for Orphans and Vulnerable Children (OVC): A Case Study of Christian Aid s Community-Based Care for OVC (CBCO) Program by: Bruce Larson, PhD Center for Global Health and Development Boston University School of Public Health Boston, Massachusetts, USA September 2010 (Revised November 2010) The USAID Project SEARCH, Orphans and Vulnerable Children Comprehensive Action Research (OVC-CARE) Task Order, is funded by the U.S. Agency for International Development under Contract No. GHH-I , beginning August 1, OVC-CARE Task Order is implemented by Boston University. The opinions expressed herein are those of the author and do not necessarily reflect the views of the funding agency.

2 Contents Acknowledgements... 1 Acronyms Introduction The CBCO Program Review of Methodological Approach Analysis & Results Summary and Recommendations References... 37

3 Acknowledgements The author thanks Claire Milligan and Jane Machira (Christian Aid CBCO Program), Andrea Halverson and Jason Wolfe (USAID), Malcolm Bryant and Bram Brooks (BU), and the OVC Technical Working Group for substantive support and advice during the completion of this analysis and Margaret Bii for research assistance. The author would also like to thank the BIDII staff (Margaret Muthui, Juliana Masila, and Nancy Mutisya), IDCCS staff (Florence Oduor, John Ouko, and George Nyamor), CBCO program facilitators, and SLA members for their support, assistance, and insights into the CBCO program. This analysis could not have been completed without them. 1

4 Acronyms BIDII BU CA CBCO CBO CGHD CP HES HH IDCCS IGA KES OGAC OVC OVC-CARE PEPFAR PSS SLA USAID Benevolent Institute of Development Initiatives Boston University Christian Aid Community-Based Care for OVC Community Based Organizations Center for Global Health and Development Child Protection Household Economic Strengthening Household Inter Diocesan Christian Community Services Income Generating Activity Kenyan Shillings Office of the Global AIDS Coordinator Orphaned and Vulnerable Children OVC Comprehensive Action Research President's Emergency Plan for AIDS Relief Psychosocial Support Saving and Loan Associations United States Agency for International Development 2

5 Executive Summary OVC programs that include substantive household economic strengthening (HES) components aim towards improving the economic capacity of households to provide for a larger share of overall needs for their families (increased cash and non-cash income, improved access to credit, increased savings, etc.). As is the case with OVC programs in general, relatively little information exists to document the costs of implementing such programs as well as the impacts or benefits achieved beyond counting of program services received. Christian Aid, through funding from U.S. President s Emergency Plan for Aids Relief (PEPFAR) and its own resources, implemented the Community-Based Care for OVC (CBCO) program during (with an extension into early 2011). The CBCO program was designed to improve HES through the development and support of village savings and loan associations (SLAs) for caregivers of OVC. In Kenya, the CBCO Program was implemented through two partner NGOs: the Benevolent Institute of Development Initiatives (BIDI) based in Machakos and the Inter Diocesan Christian Community Services (IDCCS) based in Kisumu. In 2009, the program was providing support to 108 SLAs, which included over 3000 SLA members who were caring for over 7000 OVC. These SLA members were/are typically women who are also household heads or main sources of household economic support. As part of the Orphans and Vulnerable Children Comprehensive Action Research (OVC-CARE) Project implemented by Boston University s Center for Global Health and Development (CGHD), the CGHD agreed to conduct a costing analysis of implementing the CBCO program in FY2010 and impact analysis of the program in FY2011. Because HES activities were a major component of the CBCO program, the CGHD partnered with Christian Aid, BIDII, and IDCCS to complete an analysis of the costs of implementing the CBCO program. For this costing analysis, we focused on costs of implementing the program from the perspective of the local organizations (BIDII and IDCCS) directly implementing the program on the ground. The results of this analysis are presented in this report. The companion impact evaluation analysis will be completed in FY2011. Three key conclusions emerge from this analysis. First, when evaluating the impacts of OVC HES programs, it is important to recognize that many activities within the 6+1 OVC program areas directly affect the economic status of households. 1 Given that household wealth is a key marker of child vulnerability (Akwara, Noubary et al. 2010), any OVC program activity that affects a household s budget constraint (either improving income or reducing the costs of accessing goods and services) will improve its economic 1 For reference, the OVC service domains are food/nutrition, shelter and care, protection, health care, education, psychosocial support (the first 6 service domains) and household economic strengthening (the additional service domain). 3

6 situation. As a result, when analyzing the costs and impacts of HES programs, the importance of non-hes program activities (such as school, medical, and nutrition support) must be included in the analysis. Second, based on the analysis in this report, the direct financial cost of implementing this program for BIDII/IDCCS was $49/57 per SLA member and $21/25 per OVC per year. Most of these costs can be grouped into three key components: (a) (b) (c) NGO financial expenses associated with program implementation (staff and local travel). A small number of program and support staff oversea the programs. Office-based costs are modest. Travel costs are used for program management and delivery of services to the numerous SLAs distributed across the rural areas served by the programs. Relatively small payments to a number of individuals from the communities who are the key conduit of information and support to the individual SLAs and OVCs supported by the programs in the rural communities. Direct payments associated with OVC educational expenses (school fees and supplies). This information on actual costs of program implementation are tremendously less than costing information generated for more aggregated projections of what it might cost to provide a certain package of services to OVC. For example, Stover et al. (2007) estimated that the typical financial cost of a package of services might be between $ per year depending on age. The CBCO program s financial costs per OVC were less than 5% of the modeled cost. And third, financial costs do not account for the fundamental role of volunteers, who were responsible for implementing key components of the program. The two key categories of volunteers were facilitators who supported SLAs or school-based programs and mentors who served essentially as social workers for OVC and their guardians. While facilitators were both men and women, almost all mentors were women. Each NGO marshaled an estimated 14,000-15,000 days of volunteer or semi-volunteer time for program implementation. The imputed opportunity cost of this time was $47/household for BIDII and $35/household for IDCCS, so that the estimated total cost of the program was $101/household for BIDII and $98/household for IDCCS. We acknowledge that the estimates of volunteer labor were based on discussions and interviews with program staff since no detailed records exist of volunteer time and activities. However, even if the estimates are 100% too high (i.e., current estimate reduced by 50%), the average cost of the program for each SLA member would be around $75, which is still substantially higher than direct financial expenses. The goal of a costing analysis is to summarize the production structure of a program or project based on an understanding of overall costs and the allocation of such costs to key input 4

7 categories (called a cost profile). Because financial reports for organizations are created for financial reporting, which is not the same as understanding the structure of program costs, costing analyses currently must attempt to reorganize and restructure financial reports afterthe-fact into a logical costing framework. This step would be unnecessary in the future if U.S. government funded OVC programs would receive direct guidance on a reference cost profile that all OVC programs would use (this recommendation is also relevant for other organizations funding and/or implementing OVC programs). This recommendation is very easy for program financial/accounting staff to implement when inputting information into accounting databases (one extra field with a costing category code ). If this recommendation was implemented, programs themselves could report easily on the level and structure of OVC program financial costs. Over time, this information could be organized (perhaps through an on-line database) so that other s working in the field could easily acquire information on actual costs of implementing OVC programs for policy and programming reasons. 5

8 1. Introduction Christian Aid, through Track 1 funding from U.S. President s Emergency Plan for Aids Relief (PEPFAR) and its own resources, implemented the Community-Based Care for OVC (CBCO) program during (with an extension into early 2011). The CBCO program was designed to improve the economic strength of households caring for OVC and to provide other support to these children (e.g., educational support). In Kenya, the CBCO Program was implemented through two partner organizations: the Benevolent Institute of Development Initiatives (BIDI) based in Machakos for activities in Eastern Province (Machakos and Makueni Districts); and the Inter Diocesan Christian Community Services (IDCCS) based in Kisumu for activities in Nyanza Province (Siaya, Rachuonyo, Kisumu, Migori, Bondo, and Nyando Districts). As part of the Year Two work plan for the Orphans and Vulnerable Children Comprehensive Action Research (OVC-CARE) Project implemented by Boston University s Center for Global Health and Development (CGHD), the CGHD agreed to conduct a costing analysis of OVC programs focused directly on household economic strengthening (HES) activities. Because HES activities were a major component of the CBCO program, the CGHD partnered with Christian Aid, BIDII, and IDCCS to complete an analysis of the costs of implementing the CBCO program. The results of this costing analysis are presented in this report. The CBCO program provides HES and other services to households caring for OVC (Christian Aid 2009). These households are often members of the extended family, which is the typical case for OVC care in developing countries. As is well recognized, a substantial share of households in developing countries is not able to meet the material and emotional needs of OVC because they are poor. They were poor before assuming responsibility for their charge, and they perhaps became even poorer with the additional person in the household. If the economic situation of these households was adequate, the basic material needs of OVC food, shelter, clothing, education, health care, protection would be provided by these households and there would be substantially less needs for OVC support programs. However, in response to the material and emotional needs of OVC, the U.S. government through the U.S. President s Emergency Plan for AIDS Relief (PEPFAR) spent about $1 billion during on activities to improve the wellbeing of orphans and vulnerable children (OVC) (United States Government 2008). Through the Reauthorization Act of 2008, significant sums will continue to be allocated to OVC programs between 2009 and 2013 (The Reauthorization Act of 2008). At least five out of the six core OVC program areas funded through the Reauthorization Act of 2008 e.g., food/nutrition, shelter and care, protection, health care, and education are direct responses to poverty within households caring for OVC. These programs allow a poor household to provide for OVC needs that the household could not otherwise provide given their income and wealth situation (or in some case would not). HES activities are intended to improve the economic capacity of households to provide for a larger share of overall needs for their families now and in the future (increase cash and non- 6

9 cash income, improve access to credit, increase savings, etc.). PEPFAR guidance on HES programs emphasizes that most OVC program areas also directly affect household economic strength (see PEPFAR s Orphans and Other Vulnerable Children Programming Guidance, Interventions that save household labor and expenses can relieve the burden of diminished capacity and perhaps allow families to allocate resources for more productive, remunerative uses (Section 3.b.7). In other words, providing educational support for an OVC during one year, which relieves the burden on a household in the same year, is an intervention that allows families to allocate resources temporarily that otherwise might have been used for education to another use. Other uses could include investments in productive assets, which could benefit the household in future years as well. Of course one year of educational support is not as valuable to a household as multiple years of secure support. Thus, because almost all OVC program areas contribute to HES objectives, the costing analysis focused on the overall CBCO program. The remainder of this report is organized into five sections. Section 2 describes the CBCO program. Section 3 summarizes the methodological approach and steps followed for data collection and compilation. Analysis and results are presented in Section 4, and Section 5 contains the discussion and conclusions. 7

10 2. The CBCO Program The core HES activity within the CBCO program is the support of village saving and loan associations (SLAs). An SLA is comprised of representatives from OVC households (usually a guardian), who form a group (the SLA). The SLA meets regularly (e.g. once a week, twice a month), and SLA members make a standard contribution (e.g. KES 25) at each meeting (savings contributed at SLA meetings and kept in the SLA s lock box). The savings and loan association model, which is a variation on a community-managed micro-finance institution, was developed in the 1990s and been widely adopted around the world. 2 The SLA structure can contribute to the economic strength and security of the SLA member households in at least five important ways. First, the SLA provides an institution for saving that does not involve additional fees. Given the very small amounts saved, formal institutions are simply not a possibility and these households would otherwise keep such cash in their home (without earning a return and with perhaps more exposure to theft). When the SLA capital is liquidated at the end of a cycle (e.g months), the SLA member receives a payment based on her (or his) share of savings. A payment can be larger than savings because of interest payments on loans and a share of earning from group IGA activities. Second, the SLA is a source of credit for SLA members, who take out small loans to meet basic needs (e.g. perhaps to purchase medicine) and for individual income generating activities (e.g. trading small amounts of food stuffs). These loans are typically small and have a short payback period (e.g. 3 months with 10% interest for the 3 month period). Third, the SLA as a group can decide to engage in group income-generating activities (group IGAs). In such cases, some portion of the SLA capital might be allocated to the IGA activity as well as labor contributions (and sometimes land) from SLA members for the IGA activity. Such group activities, such as planning hybrid maize on a plot, raising rams for sale, or developing a nursery for fruit tree seedlings for sale locally, allow very labor constrained (and poor) households to contribute and benefit from larger IGA activities that are not feasible on their own. Fourth, the SLA at times serves as a social safety net for SLA members. If an SLA member or someone in the household falls ill, the SLA might request an additional small donation from individual group members (a small amount of cash, and small amount of maize) which is provided as a donation to the SLA member. And fifth, the basic security provided to an individual SLA member by being part of a group should be acknowledged. An important share of SLA members are elderly women, who are household heads caring for their grandchildren or children of other members of their extended family or community. As of 2009, there were 108 SLA groups in the CBCO program in Kenya (52 with BIDII and 56 with IDCCS), with participation from over 2,500 OVC household representatives (typically a female 2 For more information, the interested reader can go the the microlinks website, which is supported by the USAID Microenterprise Development office. For more on the development of the SLA approach, see Allen, H., CARE International s Village Savings & Loan Programmes in Africa: Micro Finance for the Rural Poor that Works, August 2002 (accessed online at: 8

11 often household head who is the primary guardian or caregiver for OVC in her household as well as potentially her own children). These households included 7,201 OVC. The CBCO program supports the organization and operation of SLAs in the program through SLA facilitators. These facilitators attend the regular SLA meetings, assist with financial management and record keeping, and provide additional information to the group for IGA activities. The facilitators also are the conduit through which the CBCO provides supplies to the SLAs (e.g. inputs for IGA activities) and other services (additional information and training to SLA members related to business, agriculture, and OVC welfare). In many respects, the SLA facilitators act like agricultural and household extension agents for SLA groups. At times, SLA facilitators will arrange for staff from local government agencies to attend SLA meetings for information exchange. Each SLA also identifies two members who serve as mentors for the CBCO program. These mentors are responsible for visiting their assigned OVC within the households of the SLA members. These mentors essentially serve as informal social workers in their communities. The CBCO program also provides other goods and services directly to households (and sometimes through the SLA) in addition to the SLA services. These services have included food and nutrition support (provision of seeds, livestock, training on growing kitchen gardens, direct food donations), medical support for an OVC in the HH, support for school fees for an OVC, caregiver training related to child protection and psychosocial support (PSS) and child protection (CP), and services related to income generating activities (e.g. information, training). And finally, the CBCO provides school-based programs (youth and kids clubs) through peer educators who lead the after-school programs (focused on educational support, health and life skills training, and other PSS). 9

12 3. Review of Methodological Approach The objective of this analysis is to estimate the annual costs of goods and services used to implement the CBCO program in FY2009 (October 2008 through September 2009). The costing perspective, also called the accounting stance, is from the perspective of the Kenyan NGOs (BIDII and IDCCS) implementing the program. FY2009 was the last full fiscal year of the original 5-year program and generally reflects annual program implementation costs for a program that was established and operating. The study did not focus on additional costs of the CBCO program incurred at the level of Christian Aid. CA already submits financial reports directly to the U.S. government on its expenditures that can be easily reviewed to understand additional costs incurred by CA activities related to implementing the CBCO program. The study also did not focus on additional costs incurred by the U.S. government (in Washington and Kenya) for the CBCO program. Types of Costs In the evaluation of social programs, the concept of cost is based on the opportunity cost of resources (inputs, goods and services) used to implement the project. For the purposes of this analysis, opportunity costs are organized into three categories: 1. Direct financial expenses used to produce a service (Kenyan Shillings, KES) for one year. From the NGOs perspective, actual financial expenditures on goods and services used within the year for program implementation reflect opportunity costs to the NGO. 2. The annual equivalent (KES) of the service provided by assets/equipment during the evaluation year whether purchased in previous years or in the evaluation year. This calculation is needed to account for the multiple-year lifespan of equipment/assets. Annualizing equipment purchases allocates the costs across multiple years of service. Annualizing this cost shows how much the NGO would need to set aside each year to purchase the equipment at the end of its service life. 3. The opportunity cost (KES) of unpaid or underpaid inputs (labor, donations). This category of costs is important to include in the cost analysis even though such costs are not actually incurred by the NGO. In theory, because individuals actually volunteered their time and other organizations and individuals provided donated items, one could conclude that suppliers were willing to contribute these inputs for their own reasons. So, for example, volunteers covered the opportunity cost of their time (otherwise they would not have 10

13 volunteered). However, if the NGO program was to be continued, replicated, and/or scaled up, the program might not be able to rely on continued donations and might have to pay for such goods and services. To estimate such costs, we first estimate the quantity of time volunteered by various individuals contributing to the program. Based on estimates of local wages that would be required to hire such labor, we then develop an estimate of the value of time contributed to the program by these volunteers. Each NGO included in this analysis existed prior to the CBCO project, so that startup costs for an organization are not relevant for this analysis. Data Collection Data collection with each NGO focused on collecting information for the three types of costs outlined above. This process comprised of interviews with staff coordinating the respective projects in the study sites and review of financial reports and project implementation documents. Where documented information was missing, estimates were based on available information and discussions with program staff. All assumptions of such estimates are provided. In sum, data were collected and organized through three basic steps that mirrored the types of costs listed above. Step 1. With assistance from each NGO, we first reviewed their annual financial report that documents itemized expenditures during the year. Such expense reports are produced by organizations for accounting, tax reporting, and donor reporting purposes. Such reports provide significant detail direct program expenses. However, financial reports are organized for financial reporting, which is not the same as needed for understanding the structure of program costs. Therefore, primary data from the financial reports were reorganized into more logical cost categories that reflect better the structure of program costs for program evaluation purposes. For example, within a financial report, the purchase of a note pads used by program staff and note pads provided to OVC for education purposes might both show up in a financial report as materials purchased. For an understanding of program costs, note pads of program staff would be considered part of general office costs while not pads provided to OVC for homework would be better understood as educational supplies provided to OVC. The details of this process are provided below. Step 2. With assistance from each NGO, we reviewed the equipment inventory to identify equipment (also called assets, durable goods) that was purchased in previous years (or the evaluation year 2009) but used during

14 In the era of computers and spreadsheet programs, analysts can simply use any standard annual payment calculator to calculate the amount that would need to paid each year to pay back a purchase over a specific time period (e.g., working life, end of project) given a specific discount/interest rate. A scrape value can be included if the item continues to have value at the end of the project (e.g. sell a used vehicle). The pmt function in Excel is easy to use and calculates an annual constant payment that would be required to pay back a loan to cover the equipment purchase over a specific time period with a specific interest rate (used to discount future values). For example, if a project purchased a piece of equipment for $10,000 in 2006, a 5-year working life was assumed, and a 10% annual discount rate was used, the function =pmt(10%, 5, 10,000) yields $2, This is the annualized cost equivalent. With a 0% discount rate, the same pmt function yields $2,000 (simply the price divided by the number of years). The difference of $ between a 10% and 0% discount rate represents the opportunity cost of funds used to purchase the equipment with a 10% discount rate. While the discount rate should reflect the social opportunity cost of capital, the theory and practice of choosing the right discount rate is less than precise. For example, the U.S. government typically tells agencies what discount rate to use when analyzing investment projects (but not all types of projects are required to use the same discount rate). Our view is that financial capital for longer term investments is obviously scarce for most organizations in sub-saharan Africa, private companies and NGOs alike. As a result, a positive real discount rate is clearly appropriate to use for program costing activities. For this analysis, we have chosen to use a 10% discount rate throughout. We provide all information necessary for readers to conduct their own sensitivity analysis to determine what would happen if another discount rate was chosen. In the above example, since the purchase occurred in 2006, but the costing analysis was conducted for 2009, the $2, figure for 2006 would then need to be inflated (using the Kenya CPI) to 2009 levels. Discount rate assumptions and the calculations for annualizing assets are shown in detail in the Analysis & Results section. Step 3. We developed information on the amount of volunteer time through interviews and discussions with program staff and reviews of program records. Based on this review, we identified categories of people who contributed time to the project (paid and unpaid) and estimated quantity of time (in days) contributed to project. We then used estimates provided by the local NGO on reasonable daily rates that they predict would be required to be able to hire such labor for the project. Finally, we multiplied annual days, the daily wage, and the number of volunteers for each type of volunteer to calculate the total imputed personnel cost of volunteers. This provides an estimate of what it would cost to implement the project in the absence of volunteer labor. For other donations (in goods), the value of the item was estimated by program staff based on current market value. All calculations and assumptions are shown in detail in the Analysis & Results section. 12

15 Step 4. Finally we included additional contributions from NGOs for implementing the program that were not included in the above three steps. For example, NGOs implement more than one program (typically from multiple funders and perhaps its own resources). In such cases, a General Director or high level manager might not be accounted for in a specific program budget. Based on a review of the NGOs overall financial report for all activities, we allocated a share of organization costs (not included elsewhere in specific programs) to the CBCO program based on the share of the CBCO program s financial costs as a share of all externally funded costs. The details of this process are shown in the Analysis & Results section. Developing a Program Cost Profile Based on a review of the data developed in the above four steps, we then grouped the information into key cost categories to provide a summary cost profile for the CBCO program implemented by each NGO. An overview of the cost profile for BIDII is provided below in Table 1. A similar cost profile is developed for IDCCS. The details of how this cost profile was developed are provided in the Analysis & Results section. The cost profile is design to describe the types of costs incurred in the project. Categories 1-4 are essentially BIDII personnel for program management, travel, and other office expenses. As explained in Section 2, the program relies on facilitators and peer educators to implement the SLA program and school-based activities for OVC. Given the importance of these individuals in the project, they are included as a separate category (category 5). The program provides materials to SLAs both for SLA management and group income generating activities (category 6). The program relies on members of SLAs to serve as mentors, who essentially serve as social workers for OVC living with SLA members (category 7), and the program provides direct educational support (school fees, school materials) for OVC (category 8). The annualized value of assets/equipment is provided as category 9, and BIDII organization contributions not included in the CBCO financial report are category 10. And last, the program relies on the services of a coordinating committee that includes members of SLAs, facilitators, and other members of the local community for OVC support and general program oversight (category 11). The 11 categories provide a logical grouping of costs for the CBCO program. Four columns for numbers are included in Table 1: direct financial expenses ( C ), financial expenses plus assets annualized (D), imputed costs for volunteer labor and additional contribution from BIDII not included in the CBCO expense report ( E ), and total costs (F). The only difference between column C and D is Category 9 (assets/equipment). In general, Column C includes direct purchases of equipment during the year, while Column E excludes actual purchases in the year but includes the annualized cost of assets/equipment used by the CBCO program (regardless of purchase year). We use simply the term total cost in Table1, where it is clear that this total combines financial expenses, annualized assets, and imputed costs for donations to the project. Instead of total, the term economic cost is often used when some costs are imputed by the analyst (Prywes, 13

16 Coury et al. 2004) We prefer to avoid the use of economic cost for this costing analysis because the term has a more complex meaning in economic theory (social opportunity cost) than simply adding some additional items onto financial expenses. For example, any tax payments included in financial expenses are transfers within the economy, so tax payments would be excluded from financial expenses. If any markets are uncompetitive, the specific uncompetitive nature of the market would need to be assessed to disentangle social opportunity costs from financial expenses. Considering such details is not that relevant when simply considering the actual costs of program implementation from an NGOs perspective, so such details analysis is not necessary (and not done in practice). Rather than creating any confusion around the term economic cost that in practice is not well understood, we prefer simply to use total costs. Table 1. Cost Profile for BIDII Category Code (A) Category Description (B) Financial Expenses ( C ) Financial Expenses + Assets Annualized (D) Imputed Cost for Volunteer Time and Headquarers Contributions (E) Total (F = D + E) 1 NGO Staff 2 NGO Office Rent 3 NGO Other Office Costs/Supplies 4 NGO Travel/Meetings/M&E 5 Facilitators and Peer Educators Facilitators Peer Educators 6 SLA Materials and Services 7 Mentors 8 OVC Education Support 9 Assets/Equipment 10 BIDII Headquarters Contribution 11 Impact Zone Coordinating Committees Total 2 14

17 4. Analysis & Results We applied the costing approach described above to each NGO (BIDII and IDCCS). In this section, we present the results in a step-by-step way for each site. BIDII Financial Expenses For this analysis, the costing year is specifically October 1, 2008 through September 30, 2009, which is the U.S. government fiscal year 2009 (FY2009) used for reporting purposes. BIDII s financial report is contained in an excel spreadsheet with one worksheet for each quarter. An additional worksheet shows extra expenses incurred by the project towards the end of the year when exchange rate variations allowed for more local currency expenses than planned in the US dollar budget. These five worksheets were combined into a database for analysis (each line in the database is an itemized expense). Figure 1 shows the 7 basic categories of costs included in the financial report (items 1-7 at the top). Total financial costs for the CBCO program were KES 5,448,439 in 2009 ($US 75,673 using an average annual exchange rate of 72 KES/$). For reference, the CBCO program represented 51% of all external funding for BIDII in In 2009, a total of 1,557 households, within which a total of 3,644 OVC were living, participated in SLAs supported by the BIDII CBCO program. Thus, the project directly spent about $49 per SLA member household or about $21 per OVC in SLA-member households for all activities during the year. Because Christian Aid contributed its own resources, the PEPFAR contribution per OVC was less than $20. For perspective, a tourist could easily pay $20 for a cab ride from the airport to a hotel in downtown Nairobi. The financial report categories in Figure 1, while appropriate for financial reporting, do not describe the structure of the project as implemented. For example, the personnel category includes BIDII staff (e.g. the CBCO program manager, the financial support staff, and so on), while the facilitators used to provide services to the SLAs show up under OVC support activities. After reviewing individual items in the financial report database, we created several more detailed sub-categories which are also provided in Figure1 (with four-digit codes for data management). We then allocated each individual itemized expense in the annual financial report to one of these sub-categories (372 individual itemized expenses). Based on the sub-categories in the financial report, Table 2 shows how the expense report subcategories were allocated to the cost profile categories that better describe the production structure of the CBCO program. For interpretation, each cost profile category is an input category used in the production process for the CBCO program. 15

18 Based on the allocation of financial report sub-categories to the 8 cost profile categories, Table 3 provides a summary of the financial cost structure of the BIDII CBCO program for FY2009. The largest cost categories in terms of direct financial expenses for the BIDII CBCO program were direct educational expenses for OVC (30%), BIDII personnel (20%), NGO travel/meetings/m&e costs (17%), and materials for SLAs (15%). Office-based expenses (e.g. office rent and supplies in categories 2 and 3) were a small share of total expenses (< 6%). Table 3 also shows that payments for SLA facilitators and mentors, a key input into the CBCO program, account for relatively minor shares of total financial expenses. We will return to a discussion of these payments in the section below on volunteer time. No assets/equipments were purchased during FY2009. Figure 1. Structure of BIDII Financial Records NGO Expense Categories in Annual Financial Report for 2009 Total KES = 5,448, Personnel 2. Fringe Benefits 3. Travel 4. Equipment 5. OVC Support Activities 7. Other n = 88 KES = 1,077,465 n = 9 KES = 60,095 n = 60 KES = 400,610 n = 0 KES = 0 n = 157 KES = 3,639,172 n = 7 KES = 271, Salary Salary (via loan) Taxes on Salary Health and Social Insurance Leave Allowance Staff Coordination M&E Coordination Vehicle Servicing Other Travel (3, 2) * * Numbers in ( ) indicate Financial Report categories for each 4 digit subcategory code. Combines information from Financial report as well as exchange rate gain sheets Education Fees Education Other Facilitator Payments Mentor Motivation Local Meetings Training and Capacity Building Meetings Other Annual Assessment Materials Just SLAs Materials SLAs, Mentors, Kids Clubs Materials Just Facilitators Materials Mentors Bank Charges Rent/Office Repairs Communications Office Supplies Video Production (5) 16

19 Table 2. Reorganizing Financial Report Categories into the Cost Profile Categories. Costing Profile Category Code Sub-Category Costing Category Description for Financial Report Sub-category description Financial Report Category 1 NGO -- Staff Salary 1100 salary Personnel 1 NGO -- Staff Salary 1200 taxes on salary Personnel 1 NGO -- Staff Salary health and social 1300 insurance Personnel 1 NGO -- Staff Salary 2100 leave allowance Fringe 2 NGO -- Office Rent 7200 rent or office repairs Other 3 NGO -- Bank Charges 7100 bank charges Other 3 NGO -- Office Communications 7300 communications Other 3 NGO -- Misc. Office Supplies 7301 office supplies Other 3 NGO -- Audit Fee 7310 Audit fee Other 3 NGO -- Video Production 7310 video production OVC Support 4 NGO -- Staff Local Travel 3100 staff coordination Travel 4 NGO -- Travel for M&E 3101 M&E coordination Travel 4 NGO -- Staff Local Travel 3200 vehicle servicing Travel 4 NGO -- Staff Other Travel (not local) 3300 other travel Travel 4 NGO -- Local Meetings and Networking local meetings and 5500 networking OVC Support 4 NGO -- Other Meetings (not local) 5700 meeting other OVC Support 4 NGO M&E Activities 5800 annual assessment for CA OVC Support 5 SLA Facilitators -- Stipends 5300 facilitator payments OVC Support 5 SLA Facilitators -- Items supplied 5902 facilitators OVC Support 6 SLA Groups -- Training/Capacity training and capacity 5600 building OVC Support 6 SLA Groups Items Supplied by NGO (IGAs) 5900 SLA OVC Support 6 SLA Groups -- Items also for KC and Mentors materials SLA, mentors, 5901 kids clubs OVC Support 7 Mentors Gratuity 5400 mentor motivation OVC Support 7 Mentors -- Items supplied 5903 mentors OVC Support 8 OVC -- Education Expenses 5100 education fees OVC Support 8 OVC -- Education Expenses 5200 education other OVC Support 17

20 Table 3. Summary of BIDII Financial Expenses by Cost Profile Category Costing code Sub-Totals KES Actual % Total 1 NGO Staff 1,112, % 2 NGO Office 109, % 3 NGO Other Office Costs/Supplies 207, % 4 NGO Travel/Meetings/M&E 944, % 5 6 Payments for Facilitators (and Peer Educators) 487, % Payments for SLA Materials and Services 836, % 7 Payments for Mentors 86, % 8 Payments for OVC Education Expenses 1,663, % Total 5,448, % Annualized Cost for Assets The CBCO program purchased 7 basic items during the project, which are listed in Table 4 below. A service life of 5 years was assumed, and Kenya inflation (annual average based on consumer price inflation) figures were taken from the International Monetary Fund International Financial Statistics. The Toyota Land Cruiser was by far the largest, with a purchase price of KES 2 million in This price is actually lower than a typical local price (e.g. in Nairobi) because Christian Aid was able to procure and import the vehicle tax and duty free due to its USAID funding (and US Government agreements with the Kenyan Government). If this program did not receive this subsidy, the purchase price would have been at least 30-50% higher. We assume that the vehicle could be resold for 30% of its value after 5 years. With a 10% discount rate for equipment purchases, the annualized value of all equipment inflated to 2009 values based on Kenyan consumer price inflation is KES 604,856. For reference, inflation information for Kenya is also provided in Table 4. 18

21 Table 4. BIDII CBCO Program Equipment, Annualized Costs, and Kenyan Inflation Asset Description Year Purchased Price (KES) Service Life Resale Value % Rate Annual to Purchase Year Annual 2009 Digital Camera , % 6,463 8,693 Laptop , % 28,226 37,965 Printer , % 3,297 4,435 Secretarial Chair , % Training Board , % 923 1,000 Training Board , % 923 1,000 Toyota Landcruiser ,093, ,156 10% 449, ,790 Total 490, ,856 CPI Inflation Index Year (IMF Financial Statistics) Volunteer Time Besides the NGO staff who implemented the program (with salary and related payments included in the financial report as personnel and benefits in Figure 1), the CBCO program relied directly on four groups of individuals for program implementation (see Figure 2). As discussed in Section 2, SLA facilitators provided several types of direct support to SLAs. For example, they assist with record keeping of the SLA and they deliver program supplies to the SLA (e.g., the box for savings, locks for the box, materials used for group IGAs). Facilitators provide information on income-generating activities that the SLA or individual members might pursue, which might also include organizing for an outside speaker to attend SLA meetings. Peer educators to some large degree have a similar status within the CBCO program but they lead the school-based programs for OVC. SLA mentors are recruited from SLA members to serve essentially as social workers within the project. They conduct direct visits to homes of SLA members to counseling, support, and evaluation of OVC caregivers (typically the SLA 19

22 member) and their children. Finally, the program relies on the CBCO committee in each program impact zone. An impact zone is a sub-location in Kenya (government location), and the several SLAs in each sub-location are associated with each CBCO committee. Figure 2 outlines the number of individuals (facilitators, peer educators, mentors, and Impact Zone Committee members) involved in implementing the BIDII CBCO program and basic estimates on the amount of time they contribute monthly to the CBCO program. From Figure 2, the CBCO operates in 6 impact zones. A coordinating committee comprised of 20 members oversees activities in each zone through a monthly meeting. Besides providing oversight to the CBCO program, committee members follow up with individual OVC cases where serious problems have been identified. Based on discussions with BIDII, we estimate that each committee member spends about 1 day (8 hours) per month to the coordinating committee. With 20 members per zone and 6 zones, this adds up to about 120 days per month for these committee members. The CBCO program provides 2 SLA facilitators and 2 Peer Educators for each impact zone (6 impact zones), with 8 or 9 SLAs per impact zone. Based on discussions with program staff, facilitators, and peer educators, facilitators work about 15 days per month on SLA activities and peer educators work about 12 days per month (school based kid s and youth club activities). Based on these estimates, all facilitators combined contribute 180 days per month of time to the project (2*6*15) while all peer educators combined contribute 144 days per month (2*6*12). And finally, 102 SLA members contribute to the CBCO program as mentors. With roughly 30 SLA members in each SLA, each mentor would work with approximately 15 households. Based on discussions with mentors and CBCO program staff, mentors are estimated to allocate ½ of a day per month to each SLA household. This time includes round trip travel time to the SLA member s home, time for interaction with the SLA member, and time for interaction with children in the SLA household. With ½ day per household and 15 households per mentor, this adds up to 7.5 days per month or a total of 780 days per month of mentor time contributing to the CBCO program. Because all of these individuals who contribute to the CBCO program are not employees of BIDII or the program, records do not actually exist to document actual time contributions of all of these individuals. At a minimum, the information provided in Figure 2 outlines the levels of effort that would be required to implement a similar type of program as planned. We return later to the assumptions in Figure 2. Since all assumptions are provided in this section, it is easy for a reader to conduct any sensitivity analysis to see how the cost results change if these assumptions on time contribution are changed. Based on the basic assumptions in Figure 2, Table 5 provides estimates of the annual amount of time contributed to the CBCO program annually. In total, Table 5 shows that these individuals allocated the equivalent of one full time person (at 260 days per year) for each SLA. 20

23 These estimates of annual labor contributions by SLA facilitators, peer educators, and mentors, we can compute the implied actual daily payment for their contributions to the CBCO program. For example, we ve estimated that a total of 3,888 days combined for SLA facilitators and peer educators. They received actual payments reported in Table 3 of KES487,340 for the year, so that the implied daily wage for their services was KES487,340/3,888 = KES 125 per day ($1.74 using KES72/$). Following the same process for mentors, based on actual payments of KES 86,000 during the year and an estimate of 9360 days of time, mentors received KES 9 per day for their efforts. Table 6 uses information on the quantity of time contributed to the project, estimates of a reasonable local wage for such time, and information on actual payments made by the projects to estimate the opportunity cost of time contributed to the project beyond what was paid by the project. For a reasonable daily wage estimate, KES300 (roughly $4 per day) was used for mentors and KES 500 per day (roughly $6.7) was used for the other three labor categories. While day labor for agricultural tasks or for tasks that require few skills can be hired for substantially less than these amounts, the amounts used in Table 6 reflect estimates of what would need to be paid to hire individuals with skills and capabilities similar to existing volunteers. People in the local community are available to work for a lower daily wage, but the program relies on a level of skilled labor and responsibilities that are not provided by all individuals in the casual labor market. All information is provided in Table 4 and 5 (and Figure 2) for a reader to conduct additional sensitivity analysis of these assumptions. Figure 2. Volunteers Used in Implementing the CBCO Program Types of Volunteers Monthly Time (estimates) Impact Zone (IZ) Coordinating Committee (20 members per IZ, 1 day per member per month) 2 SLA Facilitators per IZ (15 days per month each) 2 Peer Educators per IZ (12 days per month each) 2 Mentors per SLA (7.5 days per month each) 6 CBCO Impact Zones 6 CBCO Impact Zones 52 SLAs total Total Estimate Per Month = 1*20*6 = 120 days per month Facilitators Per Month = 2*15*6 = 180 days per month Peer Educators Per Month = 2*12*6 = 144 days per month Mentors Per Month = 2*7.5*52 = 780 days per month 23 21

24 From Table 6, we estimate that KES 4,906,000 of time was contributed by volunteers to the BIDII CBCO program. Even if the assumptions contained in Table 4 and Table 5 were 100% too high, we would still estimate that KES 2,453,000 of time was contributed to the project. This figure is still larger than any individual cost category based on financial expenses reported in Table 3. Table 5. Annual Labor Contribution to the CBCO Program (assumptions from Figure 2). Staff Position Category Number of Volunteers (2009) Estimated Working Days Spent on Project/month per person Estimated Working Days Spent on Project/month whether paid or not Annual Estimate of Time (days) Field-Based "Staff" SLA Facilitators Peer Educators Mentors from SLAs IZ Coordinating Committees Total Table 6. The cost of unpaid labor contributions to the BIDII CBCO program Staff Position Category Annual Estimate of Time (days) NGO estimate of daily wage Annual total value at daily wage Actual payments in financial report Unpaid annual total (KES) Additional Cost of Volunteer Labor SLA Facilitators Peer Educators Mentors from SLAs Impact Zone Coordinating Committee Members Total

25 Additional Contributions from BIDII BIDII implemented 5 separate projects with funding from various sources in 2009, of which the CBCO program was the largest, accounting for 51% of BIDII expenses charged directly to one of these five projects. In addition to expenses allocated to these five projects, BIDII incurred additional headquarters costs that were not billed directly to any project (paid for out of its own resources and other donations). We allocated these central costs to the CBCO program based on the CBCO program s share of total funded projects (51%), which equaled KES 416,549. Final Cost Profile for BIDII CBCO Program Based on the information developed above, Table 7 presents the final BIDII cost profile for the CBCO program. Table 8 shows the same information reported as shares of total costs within each column of costs. Table 9 summarizes average costs (per SLA member and per OVC). The information in Table 7 and 8 reflect the production structure of the CBCO program. In terms of financial expenses only, 43.6% was for BIDII implementation of the project (cost categories 1-4), 30.5% was for educational support to OVC, 15.4% were for supplies to SLAs, 4.5% were small stipends to facilitators, 4.5% were also small stipends to peer educators, and 1.6% were even smaller amounts paid for mentor motivation. This cost structure changes dramatically when evaluating total costs, where the role of facilitators, peer educators, mentors, and coordinating committees becomes apparent. The CBCO program leverages large amounts of time of other individuals for implementation. Table 7. Complete Cost Profile for BIDII CBCO Program Costing Profile Code (A) Sub-Totals (B) Financial Expenses (C) Financial Expenses + Assets Annualized (D) Imputed Cost of Volunteer Time and BIDII Headquarters (E) Total (F = D + E) 1 NGO Staff 1,112,660 1,112, ,112,660 2 NGO Office 109, , ,200 3 NGO Other Office Costs/Supplies 207, , ,898 4 NGO Travel/Meetings/M&E 944, , ,711 5 Facilitators and Peer Educators Facilitators 243, , ,333 1,057,003 Peer Educators 243, , , ,337 6 SLA Materials and Services 836, , ,675 7 Mentors 86,700 86,700 2,722,000 2,808,700 8 OVC Education Support 1,663,255 1,663, ,663,255 9 Annual Asset Services (2009) 0 604, , BIDII Headquarters Contribution , ,549 Impact Zone Coordinating 11 Committees , ,000 Total 5,448,439 6,053,295 5,322,549 11,375,843 23