Overview – Financial Analysis The Financial Analysis component determines the financial situation of the CO. The financial analysis focuses on shared costs as this is the basis of the CO operating structure. The three components of a CO’s financial viability are: (a) portfolio size, (b) rate of shared cost recovery, and (c) cost of shared support.1 1Excerpt from CARE Niger Cost Structure and Financial Viability Analysis, March/April 2006, M. Fuhrer Purpose Monitor the CO to ensure healthy financial situation Proactive crisis prevention and opportunity identification Ability to make decisions based on information Understand the amount and timing of cost adjustment for SPC Understand the amount and timing of cost adjustment for other cost pools Ensure broad financial analysis by assessing all options Risks if not completed: May not be able to afford future costs May not have sufficient time to address the gap between planned budget and actual Roles & Responsibilities Finance Manager is responsible for conducting the financial review and identifying issues and/or opportunities. A decision committee (perhaps the SMT) may be created to review the results and make decisions. CD will be accountable for reviewing the results and making final decisions. Project Managers are responsible for providing accurate/valid data for the analysis. CARE Resources CARE USA Strategic Support – David Sexton, Nick Marudas CARE USA GOIU – Mike Fuhrer, Charlie Danzoll CARE Peru CD – Milo Stanojevich CARE Honduras – Emma Mejia (Fin Controller) Inputs Pipeline Cost of shared support Templates Financial Analysis Template v1 Examples Honduras Financial Analysis v1 Bolivia Financial Analysis v1 References Niger (M. Fuhrer) Angola (M. Fuhrer) Tajikistan Change Management Report (Tajikistan SMT) Peru (M. Stanojevich) Peru (M. Fuhrer) Timeframe & Dependencies Financial Analysis should be conducted on a quarterly basis when the pipeline is completed. The financial analysis is highly dependent on receiving accurate and validated information from projects and proposals. © 2006 Accenture. All rights reserved.

Guide – Financial Analysis High-Level Process Flow: 1 Getting Started 2 Gather data and input into tool 3 Conduct macro financial analysis 4 Identify funding scenarios and potential options 5 Identify option for future state 6 Ongoing financial analysis Step Description How do I do it? 1 Getting started Pipeline and cost structure reports are created. Use as a primary input for financial analysis. Engage Atlanta as necessary for review. 2 Gather data and input into tool Input all data from pipeline and SPC cost reports into the Financial Analysis template. Review to ensure the data is accurate. Modify the Financial Analysis template as necessary to include scenarios relevant to the CO. The Finance Manager should cut and paste the tabs of the pipeline (excel version) and the SPC cost structures at the end of the Financial Analysis template. Use the data from the pipeline and SPC cost reports to fill in the yellow cells in the ‘Data and Graphs’ section of the Financial Analysis template. Delete the empty rows. Format the graphs as appropriate. Ensure that all other cost pools are captured on tab 4. Any resource (office, staff, management, vehicle, etc) that is utilized by more than one project but is not captured in SPC (tab 3) should be captured on tab 4. The Finance Manager may get assistance from the Finance team to complete this step. However, the Finance Manager is responsible for reviewing the data for accuracy. The Finance Manager should conduct a review session with necessary parties (CD and/or SMT) for validation of data. © 2006 Accenture. All rights reserved.

Guide – Financial Analysis Step Description How do I do it? 3 Conduct macro financial analysis Analyze the data. Start with the analysis questions included in the Financial Analysis template. Also add analysis questions based on the specific CO’s situation (regional, removal of anchor program, etc). Determine trends. The Finance Manager should fill in the ‘Findings’ section of the Financial Analysis template on each of the tabs by answering the questions in the ‘Analysis’ section. Conduct review session with necessary parties (CD and/or SMT) to confirm findings and determine any additional scenarios or situations that should be investigated. 4 Identify funding scenarios and potential options Based on pipeline, cost structure, current initiatives (internal/external), determine possible funding scenarios: Best case, likely case, worst case, etc. Sometimes the scenarios coincide. Based on the scenarios identified, develop potential options for adjusting the CO. The Finance Manager should obtain input from the CD and/or SMT in determining the possible scenarios when taking potential proposals and project end dates into consideration. Based on their input, develop the scenarios from a financial perspective utilizing the Financial Analysis Template. Add rows as necessary to the Financial Analysis template. Develop potential options for adjusting the CO. Define which sources, if any, of SPC / other cost pools will be impacted and by what amount. Objectives: (1) Determine the funding scenarios (Ex. If we win proposal A, if we don’t win proposal A, if project X ends, if project X is extended, etc) (2) Determine the potential options for adjusting the CO (Ex. Decrease operating costs, increase operating capacity, etc) (Continued) © 2006 Accenture. All rights reserved.

Guide – Financial Analysis Step Description How do I do it? 4 Identify funding scenarios and potential options (Continued) The CD is responsible for determining a date when a decision on which option needs to be made. This may be done through a workshop with the Finance Manager and the SMT. Tip: A decision date on the future state option should provide enough time to design and develop the detailed impacts to the CO – Organization Structure, Processes, Staff Development, and Change Management. Depending on the extent of the impact and the capacity for transition activities, 3-6 months prior to implementation of changes is a general standard. 5 Identify an option for future state Based on the likely or conservative funding scenario, present the various CO options and the pros and cons of each. Decide on an option. Depending on the extent of the financial impact, the CD should hold discussions with RMU. The CD and Finance Manager should discuss future state options with the SMT through meetings. Explore the pros and cons and use the transition vision and CO objectives as a guide in decision making. The CD is ultimately accountable for determining the future option. 6 Ongoing financial analysis Every quarter when the pipeline is completed, a review of financial situation should be conducted. Any issues / opportunities should be highlighted. © 2006 Accenture. All rights reserved.

Guide – Financial Analysis Hints & Tips Data accuracy and validity are key to the relevance of the financial analysis. The following are some red flag examples to watch for: Projections for the project close-out quarter are the same as the fully operational quarters. Project projections for every quarter are exactly the same. Gaps in SPC are addressed in three ways: Increased project coverage (from new projects or existing projects), utilization of unrestricted or the CO’s general purpose fund, and/or reduction of the SPC cost structure. The solution is typically a combination of all three. Challenge Action How can we decide on a future state option when we don’t know all the detailed impacts on organization structure and processes? The future option in the Financial Analysis component is financially driven. It needs to be defined to provide a direction for making changes to organization structure and processes. Once the detailed impacts on organization structure and processes are designed, it is validated against the financially driven future option. Sometimes, when the organization structure and processes are designed, it is not cost sustainable compared to the future option. Then, decisions may need to be made to make adjustments. Refer to ‘Organization Structure’ component and ‘Processes’ component. © 2006 Accenture. All rights reserved.