Operationalizing the workplan and

budget

STOP TB workshop14 December 2005

OUTLINE

1- The budget and workplan process overview

2- Global Fund policy on budgets and workplans

3- Budgets and workplans: approach and presentation

4- Issues in setting budgets and workplans

5- Global Fund budget review process

6- Miscellaneous issues

Slide 2

Grant process key dates

Proposals Submitted

1.3 Screening

Eligible Proposals Selected

1.4 TRP

Review

TRP Recommend

ations

TRP Chair/Vice Chair Sign-off (Final Board

Approval)

1.5 Board

Approval

1.6 TRP Clarification

(as required)

Call for Proposals

1.1 Future Round Planning

1.2 Guidelines for Proposal

Refinement & Call for

Proposals

Board Approval

I. Proposals Management

Board Approval

Grant Start

Grant Renewal (2 years)

Grant End (up to 5 years)

The Global Fund grant process

Grant Signing

2.1 CCM Confirmation

of PR Nomination

PR Nomination Confirmed Grant Signing &

First Disbursement

2.2 LFA Selection and Contracting

II. Grant Negotiation and First Disbursement

Grant Negotiations

2.4 Review of Budgets, Workplan, and Indicators

2.5 Negotiation (including conditions

precedent)

2.6 First Disbursement Preparation

LFA Contracted

2.3 PR Assessments

18 months since first disbursement

3.3 Phase 2 Grant Renewal

Process

Updated Grant

Agreement

3.5 LFA Management

Phase 2 Go/No Go Decision

3.4 Grant Extension

3.6 Grant Support

Performance-based Funding

3.1 Ongoing Reviews &

Disbursements

3.2 Grant Revisions

III. Performance-Based Funding and Grant Support

Performance-based Funding

3.1 Ongoing Reviews &

Disbursements

3.2 Grant Revisions

End of Phase 2 Support

ARCH/300704/3Slide 3

Budget and workplan steps to grant signing

Grant Proposal

Board Approval

Grant

Cycle

Board approves grant budget upper limits

Budget and workplanaspects

Grant signing

FMS Assessment

Budgetand workplan

review

GrantConditions

TRPClarifications

TRP reviews budget

TRP review

Approx timeline

Budget prepared to

support proposal

TRP requests PR for further

information

8 weeks 3 weeks4 weeks (cat 1)5 ½ months (2) 3 months av

Max. 6 months

from board app

Slide 4

From proposal to workplan and budget

Proposal

Assumptions are based on the overall strategy of the given health intervention

Large elements of the detailed operationalization will not have yet been decided

Increasingly proposals contain more budget information than before

Workplan: What is the Global Fund workplan?

No specific format but acts like any other plan

Converts the proposal and overall strategy into a workable, coherent plan which provides accountability of action

It is based on real assumptions and risks. It harmonizes program targets with realities of implementing activities eg procurement, resource availability

Slide 5

From proposal to workplan and budget

Budget

Also no defined format, usually part of the same document as the workplan

Puts the financial realities to the workplan (operationalizes the workplan)

Ensures accountability of implementation

The workplan and budget are living documents. They will be changed over time.

Slide 6

Budget and workplan policy

TRP reviews technical merit of proposals and may seek clarifications which impact budget

A budget reduction at the TRP stage is, by default, reduced from the board approved 2 year amount

Budget and workplan should be broadly in line with the approved proposal (as adjusted by TRP issues raised)

Budget and workplan can be in the same document. If not, they should clearly reconcile

There is no firm policy on the format of budgets and workplans.

Preference for the budget to follow the program objectives and therefore be activity based

Budget periods

Slide 7

Budget and workplan policy (2): exceptional situations

What if?:

There are major changes in macro-economic or programmatic issues between the proposal and grant signing which may result in major changes to the budget and workplan?

Examples:

• major foreign exchange swing, changing the real value of the approved amount

• civil strife or other force majeure

• there is new information on treatment methods with a material budgetary and planning impact

If impact not material, proceed as normal

If impact material PR can apply for re-programming (discussed later)

Slide 8

Budget and workplan presentation and approach

Overall approach to preparing budget and workplan

Bottom up?

Top Down? Whats in the

envelope?

Trial and error?

Cost based?

Activity based?

Slide 9

Budget and workplan presentation and approach (2)

Example budgets and workplans

Activity based budget and workplan recommended following objectives and SDAs from the proposal

•Proposal template

•Grant agreement

•Detailed budget and workplan

Example workplan and budget setting process in practice.

Slide 10

Activities rollout. Budget

prepared to support

activities.

Budget and workplan presentation and approach (3)

ActivitiesBudget

and workplanaspects

ActivitiesActivitiesActivities

Approx timeline Q1 (3 months) Q2 (3 months) Q3 (3 months) Q4( 3 months)

SDA1SDA2SDA3

ObjectiveIndicators &Targets

Indicators &Targets

Indicators &Targets

Indicators & Targets

As per M&E plan and AttachementAs per proposal

Slide 11

Budget and workplan presentation and approach (4): good practice

Good budget and workplan sets good impression

Makes review and analysis easier which can mean better decision making

Be transparent

Do not be scared to provide more detail rather than less

Model should be very clear; narrative review/explanation will be positively received

Keep your portfolio manager informed. Raise concerns early and articulate them clearly

Ask the portfolio manager for advice

Develop good working relationship with LFA – understand their needs

AIDSPAN booklets www.aidspan.org

Slide 12

Budget and workplan presentation and approach (5): not so good practice

Taking the exact same budget as was contained in the proposal – unless for very good reasons

No narrative

Assumptions not clear

Envelope approach (eg balancing figures dumped)

Dropping SDAs, activities without explanation

Being unrealistic

Not reconciling the various interlinked activities eg equipping should precede implementing

Not questioning excessive costings

Not reviewing what has been prepared

Slide 13

Budget and workplan issues for grant signing

Presentation issues

Grant specific factors

Secretariat review

outcomes

Macro economic

factors

TRP review outcomes

Proposal budget

The right budget

Slide 14

Budget and workplan issues: the proposal and TRP clarification process

Round 5 proposal instructions contained fairly specific budgeting requirements

TRP reviews the technical merit of the proposal

Budget is presumed to be indicative

Detailed attention to budget by TRP is limited by time

The clarification process may or may not include issues relevant to the budget and workplan

Where there are workplan and budgetary implications the PR should demonstrate how it has taken account of them

Examples…

Slide 15

Budget and workplan issues: macro- economic factors

Foreign Exchange

No specific policy on foreign currency issues other than that grants may be denominated in USD or Euros

In budget setting use best estimates of exchange rates

Make clear assumptions on USD or euro relationship with local currency:

• eg does USD purchasing power parity apply?

Make clear assumptions on currency base of budget items:

• are budget items denominated in USD or local currency?

Inflation

Inflation: is there an underlying local inflation trend which is separate from that caused by devaluation of the local currency

Slide 16

Budget and workplan issues exercise: macro- economic factors (2)

Discussion exercises:

1. Choosing the right exchange rate and inflation factors in Ruritania

2. Significant local currency exchange rate appreciation: what approach to take?

Slide 17

Budget and workplan issues: macro-economic factors (3) – taxation

Global Fund policy

Quote from the grant agreement

General approach:

• Tax clearance certificate before grant signing

• Material amounts of tax paid are quantitied and reduced from following disbursement

Occasionally waived if not material eg VAT on local petty cash purchases

What if the tax is only recoverable in future?

What if the tax authorities refuse to exempt the PR from tax?

Slide 18

Budget and workplan issues: grant specific – procurement issues

General approach:

Procurement plan including quantities and prices not always available

Use best available information and document assumptions

Key issues

Material changes between proposal and grant negotiation

Timing issues

Planning other resources which are dependent on procurement

Slide 19

Budget and workplan issues: grant specific – procurement issues (2)

Example for discussion:

What do you do if:

The price of xxx drugs increases by 30% between proposal and grant negotiation and the drug component of the grant represented 40% of the grant in the proposal budget.

Do you:

just decrease the treatment targets in line with the increase in unit costs and avoid adjustments to other SDA’s?

hold the targets as they were in the proposal and cut other activities?

cut all activities evenly (ie pro rata to the increase relative to the whole budget)?

look for other areas of potential saving and first offset the cost increases against those, then negotiate with the GF on targets?

Look for other sources of funding?

Slide 20

Budget and workplan issues : grant specific – overlapping grants

Where separate rounds may overlap geographically and programmatically

Presently each grant stands alone for financial reporting purposes

The budget preparation should avoid possible double counting

Grant rationalization is under discussion. Recommended interim steps:

• Reporting dates

• Financial reporting system

• Align financial reports

• LFA work

Slide 21

Budget and workplan issues : Global Fund review

Review process

LFA review, scope of work

Example reviews

Secretariat reviews, roles and responsibilities

Slide 22

Budget and workplan issues : grant negotiation/ LFA assessments

LFA assessments may raise issues with budgetary implications

The Secretariat may raise issues with budgetary implications

What if the changes cannot be delivered with the budget available? Discuss

Slide 23

Budget and workplan issues : grant specific – Miscellaneous issues

CCM costs

Sub-recipients

Administration and overhead costs

Budget revision

Slide 24