7.2 Budget development/management preparedness activities
Given the difficulty in estimating costs, and the limited time available to write the proposal and develop budgets, it is necessary to give proper attention to Budget Development Preparedness Activities. The data necessary for these activities will come from existing systems such as the main financial system (Sun/Scala/Serenic) and other subsidiary systems such as Payroll, Human Resources, Fleet Management, Procurement and market investigations conducted for certain lines of procurement. This data, however, should be compiled into a toolkit to assist emergency teams speed up budget preparation and reduce guesswork.
Everyone’s knowledge channelled into a single, collaborative process helps to minimise the time diverted from the critical activities and ensures a broader participation of key positions. The following are some of the recommended preparedness activities and toolkit contents:
- The Country Director formally appoints a team of CO staff responsible for leading and supporting the budget development/management process. This team should be comprised of the different emergency programme managers, Finance (Controller, and Grants and Contracts), Procurement, Human Resources, Design, Monitoring and Evaluation and audit staff.
- When the emergency procedures are enacted, the mandate of the team will be to undertake all emergency budget preparation and revision exercises, by applying a set of locally developed budget tools and following a collaborative role-based approach. See section 7.4 Budget development process and team roles, for suggested team composition and relationships.
- The Human Resources department is responsible for maintaining updated salary scales for all positions (regular and emergency) and corresponding guidelines for hiring/firing, emergency compensation packages and relevant internal procedures. This salary scale should also include information about positions to be hired from international sources. This may involve discussions at levels outside the control of the CO. In a broader sense, following lessons learnt during the South-East Asian tsunami, this budget input should be part of an ‘emergency roster’ database developed by the CO.
- The CO Finance Department is responsible for developing budget templates for budget development (for example, BudgetMate for CARE USA COs and Annex 17.16 for other COs). The Finance Department should also have a set of templates with pre-filled costs for existing cost pools such as shared programme costs (SPC) and sub-offices, as well as provide guidelines on calculating percentages/allocation basis on cost-pool costs. These templates should be updated whenever funding position changes. There should also be templates for direct costs, which include current calculation formulas and factors such as benefit information.
- The Finance Department is responsible for preparing CARE to donor account maps to speed up the presentation of budgets in donor formats, help with transaction encoding (which in turn will speed up reporting) and detect/highlight expense categories where the likelihood of budget gaps is greater. Annex 17.13 is an example of how this can be accomplished.
- As recommended in the Tsunami Best Practices Report, the Procurement Department-with the assistance of the Programme Department-should establish and maintain ‘Approved Vendor Lists’ and ‘Updated Price Lists’, including emergency relief items, emergency-related support services and equipment-for example, communication equipment, vehicle rentals, computer equipment and temporary storage.
- As recommended in the Tsunami Best Practices Report, the Procurement Department-with the assistance of the Programme Department-should develop standardised/predefined items for various relief kits with clearly-stated specifications that can be included in the Vendor/Price Lists. This can help with faster procurement of relief items during the initial days of relief response activities.
- The Programme Department is responsible for keeping donor emergency guidelines for writing proposals, budget formats and guidelines for major donors. They should also request the Finance Department to provide analyses on funding exclusions and limitations in terms of how they affect the financing of projects. These exclusions and limits can be expressed as amounts and/or nature of the expense. The following are some examples of major donor exclusions/limitations based on the ‘nature’ of the expense:
- partial/total exclusion of for certain positions and/or costs associated with them (pension, Rest and Relaxation, etc.)
- donors may use different naming conventions on restricted items. For example, syringes may be considered ‘medical supplies/drugs’ by one donor and ‘disposables’ by others
- some donors don’t finance capital purchases such as vehicles, communication equipment, office equipment and office furniture.
- Certain exclusions are more subtle and may affect the overall project costing if these are not considered. These items should also be red-flagged for negotiation with the donor.
o Some donors don’t pay the cost of import or customs duties (or any similar fee) imposed by overseas governments on goods imported or services.
o There are instances where certain costs associated with commodity transport, storage and handling are not covered or are partially funded. It is also possible that the Internal Transport Storage and Handling (ITSH) rate offered doesn’t reflect the economic realities on the ground.
- Other relevant information to know and/or document may include:
- donor position (encourage/discourage/no opinion) regarding the use of local partners and other civil society organisations to deliver assistance to end-users. This usually has significant cost and operational implications
- allowance for contingency budgets (allowed, not allowed, percentages, amounts, what kinds of items, etc.).
- per diem/lodging rates applicable to emergencies if different from regular programmes. This may involve discussions at levels outside the control of the CO.