United Nations Development Programme RR Induction New York – 14 July 2015 “Managing the financial sustainability and effectiveness of country offices in a declining resources environment”

Quiz – True or False Please support your answer with facts. 1. XB is credited to UNDP at the moment of receipt of funds from the contributor/donor. 2. GMS can be negotiated with the partner depending on the actual cost of implementing a project. 3. GMS should be sufficient to implement a project; DPC is optional. 4. UNDP’s cost recovery policy has clearly defined General Management Support (GMS) as method of recovering management support cost from non- core funded projects and programme. Therefore it is double dipping to charge both GMS and Direct Project Cost on the same project 5. Resident Representative has the sole authority to authorize the use of country office extra-budgetary: TRUE or FALSE? 6. Resident Representative has the authority to approve budget override (expenditure without resources) without seeking clearance from HQ: TRUE or FALSE?

United Nations Development Programme □ Survival Guide: Key documents □ Funding Streams □ Case study: MICLandia Integrated Work Plan (IWP) UNDP Funding Streams Integrated Resources Management Framework (IRMF) Key financial metrics: (Delivery trends, XB projections, Pipeline, Office structure and management costing) Direct Project Costing – DPC Critical question on financial sustainability □ Conclusions Overview

IWP – Resource and overall overview 1

Survival Kit – Key documents 2

UNDP Funding stream mechanisms 3 Types of activities Types of costs Development Effectiveness Recurring costs Non recurring costs UN Development Coordination Non-UNDP/ Capital Investments Programme Development activities Management activities UN Development Coordination Special Purpose Programmatic Components Institutional Components Per harmonized decision in EB document DP/2010/3, decision 2010/2. Total: $22.6 billion Estimated total expenditure in $20.1 billion

Funding streams – Funding Typology 4

MICLandia Financial Data: Programme & Structure 5

MICLandia: IRMF Snapshot Approved Budgets as of 26 June 2015: $28,438K Total: $20,488K Development Expenditures Projection Actual expenditures as of 26 June 2015: $7,956K Expenditures yet to be realized: $8,434K Total: $16,390K Opening cash balance: $11,393K Total: $27,191K Projected income yet to be mobilized: $5,928K Cash received as of 26 June 2015: $4,705K “To be by July 2015 ” Noncore contribution Projection $15,798K Allocation received (BPPS controlled Vertical Funds) as of 26 June 2015: $5,165K The figures below indicate your targets!

IRMF: MICLandia – Simulation to reach targets 7 Note: Income and expenditures follow 2014 monthly patterns, with income lifted by the requisite % to meet the Brx 2015 projection of $15,798K and expenditures lifted by the requisite % to meet the Strategic Plan target for MICLandia of $16,390K.

Historical Delivery trends 8 How would you do things differently for this year?

Delivery projections 9

Pipeline Management 10  Strategic: Substantive relevance in programme portfolio (both Regional and Global) CriteriaQuestions+- 1. Demand for servicesEvidence of need for project? 2. Enabling environment Evidence of conducive local environment? Risks? 3. Availability of UNDP substantive expertise Within a UNDP core area of expertise? 4. Availability of critical partners? Implementing partner/s? Substantive partner/s? Funding partners? 5. Degree of development Defined project strategy, results & activities 6. Other sets of criteria and questions Class A Hard Pipeline Class B Soft Pipeline Class C – Ideas Set-up in ATLAS Project Management Maturity level Discounted factor Certification of projections Application multiyear budgeting Linkage to CO CPD Linkage to the SP outcomes and outputs Maturity test to define Pipeline Class Different Pipeline Classes ATLAS Finance Executive Snapshot  Financial: Financial sustainability through accurate resources projections

Pipeline – MICLandia’s overall picture 11 Pipeline outside ATLAS Amounts in $m Pipeline gap between data outside ATLAS and data inside ATLAS Pipeline inside ATLAS

Funding streams – Overall picture 12 What do the funding streams mean for your office?

Funding streams – Donor profile 13 Do you foresee any new potential donors?

Office cost structure: Key statistics 14 GOE BreakdownStaffing Breakdown No Direct Project Costing Including Service contractors

Office cost structure: Dos and Don’ts 15  Multifunding (Use of different funding sources) of P5s or below positions  Apply the ratio 84: 16 to the office costs (84% for staffing and 16% for GOE)  Recovery of costs incurred by services provided to agencies and projects  Functional alignment of positions based on performed functions  Use development resources to fund staffing and GOE – Direct Project Costing  Exceed the institutional resources’ allocations  Have excessively high management ratio (Corporate Integrated Resources and Results Framework – IRRF targets 8.1%)  Multifunding of D1s and above positions  Extrabudgetary reserves below 12 months without a recovery strategy

Office cost structure 16 Is this the office structure you require and can afford?

Historical XB and 2015 projections 17  What is the recommended healthy level of extra-budgetary resources?  Why are extra-budgetary resources important to the office structure?

2015 XB projections 18

Direct Project Costing (DPC) 19 Definition Organizational costs incurred in the implementation of a development activity or service that can be directly traced and attributed to that development activity (projects & programmes) or service Objective Reflect in the appropriate project budget the true direct costs of achieving the development results and objectives funded from regular (core) and other (non-core) programme resources. Eligible costs  Reflect in the appropriate implementation support activities  Development Effectiveness activities directly related to ongoing projects and country programmes, which include: Strategic Country Programme Planning and Quality Assurance? Programme Pipeline Development and Management Programme Policy Advisory Services Planning  Inclusion of development effectiveness activities in the country programme planning processes, at the project initiation  Budgeting of DPC costs in project budgets with specific lines  Inclusion of DPC costs in the Integrated Work Plan (IWP) each year

Direct Project Costing – DPC 20 Financial Sustainability Cost Alignment Workload study Support to project (NIM/DIM) implementation in operational activities (HR, Procurement, Finance, Admin, etc.) Development effectiveness (DE) support to programme implementation (Policy/Strategic Advisory, Quality Assurance, etc.)  Costs agreed with the Gov. at the initiation stage (design, formulation of the project, etc.)  Costs are integral part of the AWPs  Regular workload studies to justify DPC  Charge both staffing and GOE  Applies ISS in parallel  Make profit  Unsubstantiated distribution of institutional costs to developments outputs  By 2017, No XB resources to fund DE activities! Utilization of multiple funding for P5s and below Use of UPL or LPLUse of stand-alone project OperationsProgramme Workload results vs. CO submission Way forward on DPC

DPC MICLandia: Core workload study results 21

DPC MICLandia: XB workload study results 22

Financial sustainability question The cost of your office structure amounts to $2.3 million and you plan to use about 70% ($1.6 millions) of your extra- budgetary (XB) resources to fund this structure – please refer to slides 14, 16 and 18. As a result, your XB reserves are depleting which raises the question of your office financial viability in the short term. 23 In order to ensure your office financial sustainability, are you going to mobilize more resources and boost your delivery or reduce your office structure?