GUIDELINES FOR LEAP MULTI-YEAR BUDGET REVISION

Transcription

1 GUIDELINES FOR LEAP MULTI-YEAR BUDGET REVISION I. INTRODUCTION The Programme/Project budget is the financial expression of the programme/project implementation plan as agreed with the funding office and other partners. Project designs show the budgets for the entire life of the projects (a maximum of 5 years). Between the moment these budgets are prepared and the time activities are carried out several unforeseen factors occur sometimes rendering budgets un-realistic. These factors include among others the non-completion of activities as planned for various reasons, the increase or decrease in price, exchange rate fluctuations that cannot be accurately forecasted, etc In addition, the difficulty for NOs to budget accurately for 5 years at a time require some flexibility to negotiate changes both in design and budget as required. LEAP Second Edition recognizes this on Page 38: relevant partners negotiate and agree on any needed changes to design documents, and continue to do so over the life of a programme. However, guidelines are necessary to determine the conditions of such changes and the following general and specific guidelines aim at helping national offices and funding offices to revise programme/project budgets when necessary. It is recognized that some types of funding such as government grants, have their own guidelines on budget revision as per the agreement signed. In such cases, the specific regulations must be applied. II. GENERAL GUIDELINES As required by LEAP, NOs should make multi-year requests in the light of their budget and the funding offices should respond with multi-year commitments, firm for first year and forecast for subsequent years. Requests/Commitments and Plans/Forecasts are to be reflected in MyPBAS as soon as an agreement is reached on the Design Document. For Programmes and projects already aligned to LEAP or entering in a redesign process, there is no need to prepare an Annual Operating Plan (AOP). Such programmes and projects prepare 5-years Detailed Implementation Plan (DIP) of which only the first year is very detailed. This explains the reason why up-dates are needed in the implementation plans and detailed budgets (LEAP Budget tool, zerobased budgeting) of the coming year considering the accomplishments at the end of the current year. National Offices are required to report deviations from budget and programme/project plans, and agree on major revisions with the funding office and other partners; and on minor revisions with the local partners before implementing the needed changes.

2 While budget amendment is feasible, managers must keep in mind the need for each project to achieve its goal on time and in budget. Revisions should always consider this need. Good budgeting is expected and encouraged from all programmes/projects and frequent budget revisions are to be avoided. Multi-year and multi-sectoral planning and budgeting is not an easy task and offices should learn necessary skills. Offices may design and budget for shorter projects than starting with 5 year projects. The length of projects designs can be increased as resources, skill and experience increase. A project s budget could be increased or decreased within the cycle but the life-of project total budget (maximum of 5 years) is expected to remain the same unless there are significant issues such as an emergency or other factor that may require change in design. For instance, if US$500,000 has been agreed upon as the 5-years total project budget, re-allocation from one year to another year inside the current cycle may happen when certain conditions are met, but this should in no circumstance lead to the increase of the overall project budget at the end of the cycle. In other words, within the current programme cycle over- and underspending, reallocations from one project to another can happen, but they should not lead to exceeding the 5-years total project budget with the above mentioned exceptions. Savings in any given sector project should not lead to an increase of programme/project management cost. The level of reallocation if needed should be discussed with involved parties in a case by case basis with involved partners. When circumstances require the revision of 5-years project budgets, discussion should be engaged with all the partners and necessary actions taken. Two cases may be considered: (1) A revision of the project design is needed: If the project goal cannot be reached with the initial outputs/outcomes, then the design and its appendices may be revised. In this case, 5 years-project budget should also be revised accordingly. (2) A revision of the project design is not needed: such circumstances include the need for additional funds or lack of funds to achieve a design that are not a design or budgeting issue, but due to external issues beyond the scope of the management staff. For example hyper-inflation or the strengthening of the local currency against the US$ mid-way through implementation may mean that more funds are needed to complete the design. Budgets may be revised to reflect realities. Life of-project design and detailed implementation plan: in many cases small adjustments on plans and budgets may occur every year affecting the following years plans and budgets. This will lead to a change in the annual budget figure for the project if it happens every year. For example, the Health project has 5 years design and budgets from FY08 to FY12. The Project may change FY09 DIP & Budget due to uncompleted activities, which in its turn may affect FY10 and later years plans and budgets including the last year. In such a case, there is no need to amend the project s Five years budget every year considering that there may be an increase the first year and a decrease the following year. Only the affected year s budget will be

3 changed keeping the total project five year budget the same unless there has been a re-design. When the total project actual vary from the budget committed in MyPBAS at the end of the fiscal year, the difference should fall under the carryforward policy (see carryforward policy for details) which must be followed. Budget revisions that increase Programme/project management costs are to be avoided; if not, must be approved by the funding office. Once a logframe code has been set up and used for an activity, it should not be changed for a new activity. If a new activity is required, a new logframe code should be added following the logframe hierarchy and reflected in the project s the DIP. The Excel master tool will facilitate this process. The project being a key element in the programme, it is expected that budget monitoring is done at individual project level. III. MAJOR AND MINOR BUDGET CHANGES III.1 Major Budget revisions While it may be difficult to avoid minor budget changes during implementation, major changes are to be limited and agreed with the local partners and the Funding office. The following is considered major revision: output and outcome level revisions. Changes that will affect the reaching of one or more outcomes or the realization of one or more outputs are major and must be disclosed, agreed and documented as discussed in these guidelines. Such changes require the Funding office s approval before implementation. For major revisions, once all partners agree, the attached LEAP Project Budget revision form must be filled and signed by the appropriate involved partners (at least NO, funding office) and filed. To encourage transparent partnership with community groups and local strategic partners, the programme team may consider signing budget modifications (or part of the budget change) with these. This is especially suggested for the case when the community partner is also investing with own funds to the project Once completed, the latest LEAP budget that was submitted must be updated accordingly and becomes the official final revised budget. Change in the scope or the outcome/output of the project or programme (even if there is no associated budget revision) require a formal agreement between the communities, the funding office, the NO and associated partners. Such change needs a project/programme re-design.

4 III. 2 Minor Budget revisions In many cases, Project actual and budget may be different at the end of the fiscal year. Small adjustments on planned activities are likely to happen causing the difference between actual expenses and the annual budget. Usually, variance explanation memos disclose the reasons. Besides, certain other factors such as exchange rates fluctuations (gains or losses) will also require minor project budget revisions. The following is considered minor: revisions in one or several activities that do not affect the realization of the agreed upon output(s) and do not require more/less financial resources. In this case, no formal budget amendment process is required. The semi annual & annual narrative reports and the Finance variance explanations memo should disclose such facts as minor changes. Such changes do not require the Funding office s approval before implementation. Within the same project, line item flexibility is allowed for sponsorship funded projects as long as the projects outputs remain unchanged. However, management should make sure that the changes are properly documented and coded to enable appropriate budget monitoring and reporting. For government grants and PNS, the specific guidelines in the agreements if any, must be observed. Budget adjustments should not be made for the sake of minimizing the variances between budgets and actual. Variances must be explained as per set guidelines IV. UNUSED FUNDS AT THE END OF A CYCLE Programme/project evaluation lead to the design of the next cycle. Managers should not wait the last programme cycle to find out that an extension is needed. It is advisable that mid-term revisions are carried out to ensure that un-used funds are better utilized and also determine how best plans can be achieved with remaining funds in the remaining time. Unused funds at the end of a cycle should be considered in line with the results of the evaluation and re-design processes. While in some cases then project may achieve its set goal, in some others, project goal may have not been reached. o (1) In case the project achieves its goal, unused funds at the end of a cycle will be withdrawn by the Funding office o (2) In case such funds are available at the end of the last cycle of the programme and it appears that one or more outcomes must still be reached, partners may decide an extension period which must be discussed in the final programme evaluation and need to be in the transition strategy or plan. However, a programme extension may require some further guidelines on how to proceed with the implementation and Monitoring & evaluation for that period.

5 V. REVISION OF PROGRAMME/PROJECT DESIGN DOCUMENTS Whether major or minor national offices should ensure that changes are managed with care as they may affect the programme/project objectives (goal, outcome, output, activities) and lead to a revision at the programmatic level. Major changes as described above must be reflected in both project budgets and design documents. Design documents should remain un-changed for minor changes. However, the design document s appendices (ITT, DIP, ME Plan etc ) should be updated either during the six months reporting period or at the end of the fiscal year. Narrative reports disclosing those changes and focusing on related sections will suffice. Projects outputs should not be adjusted to the activities that have actually been implemented as it is important to measure in the first place whether or not the activities have produced certain outputs and outputs in their turn outcomes. The original logframe with its activities should be kept for reference as well as a version with the different changes resulting from analysis. The same principle apply to outcomes, the difference being that it takes longer to be achieved and are usually part of the evaluation/re-design process. Un-necessary activities should not be implemented but the decision should be based on a thorough analysis of the consequence on outputs. To ensure proper tracking of evidence of change between the original target indicators and the achievements, it is expected that targets in the ITT should remain unchanged during the life of the project. Variances should be explained. This will enable reflect on what worked well and what did not work well. VI. COMMUNICATION WITH PARTNERS Whatever the reasons are, while revising a programme/project budget due to one or a combination of the above mentioned factors, the following should be considered: Engage a dialogue with the concerned funding office and all concerned partners. The communication & negotiations should take place before implementing the changes as described above in section III. This communication can be done through several ways. The semi-annual and annual reporting periods are some good options to discuss potential Plan & Budget revision needs. However, the annual report may be too late to agree on some changes. Revision needs that were not communicated in the semiannual report must be communicated at least two months (July 31) before the end of the fiscal year to allow agreements and changes for the next fiscal year. As appropriate management should ensure that communication channels are established between Programme/project monitoring & management functions and financial functions.

6 During implementation, interim review of projects may look at the appropriateness of programme and project goals and determine if activities should be revised, cost effective or not. In the same way, interim evaluation for projects may also happen in the middle of a project of 3-5 years duration provided resources and time allow it and if the funding office agrees. This also gives the scope for budget revision if necessary. In general, on-going communication is expected between the national office and the funding office. VII. BUDGET REVISION FORM Whether significant or not, budget and programming revisions should be properly documented. NOs must keep track of any revision and ensure that revised documents are filed for further reference and auditing needs. Required changes may also be reflected in the financial reports as appropriate. For major changes, the attached form should be filled, signed and filed alongside with the updated LEAP Budget template which must be shared with appropriate partners. Attached Budget revision form: VIII. Other For aspects not covered in this document, readers are encouraged to refer to LEAP second edition and other LEAP Programme resources as well as WVI financial manual.