1. 1 Budget management Financial management of projects

2. 2 TRAINING’S OBJECTIVE The participant will be able to manage his/her activities throughout the project while respecting the validated budgetary framework and the procedures that are in force at BTC; he/she will be able to Define BTC’s budget conceptDefine BTC’s budget concept Analyse the budgetary state of affairs Propose budget changes following budget monitoring analysis according to BTC’s directives Calculate the available budget balance

3. 3 1-THE BUDGET 1.General remarks 2.Objectives of budget management 3.Structure of the budget 4.Composition of the budget: process

4. 4 1-THE BUDGET 1.1 General remarks Total budget of a project Global envelope Received from one or various donors To achieve results Project’s budget Distribution of total budget in budget lines Financial restrictions Part of the Technical and Financial File (TFF)

5. 5 1-THE BUDGET The budget is not an isolated element Contents Available resources Duration of the project/ state of progress in time

6. 6 1-THE BUDGET 1.2 Objectives of budget management Planning Necessary means to achieve the results Budget limits: Which activities are financially realizable? Follow-up of progress of activities Indication Management tool

7. 7 1-THE BUDGET Monitoring the financial situation Respecting budget limits Balance of available means Effective and efficient use of means Need for budget change Reporting Communicating financial results (internal/external)

8. 8 1-THE BUDGET 1.3 Structure of the budget Composed of 3 parts: Operational results: project’s activities Similarity with Technical and Financial File (TFF) of the logical framework Budget reserves (part X) General means (part Z)

9. 9 1-THE BUDGET 1.3.1 Budget of project activities CodeDescription Implementation mode BUDGET (EUR) A Access to drinking water and hygiene for rural populations in the villages of Dosso and Yelou is improved in a sustainable way 2.160.000 A_01 Access to drinking water is improved 1.200.000 A_01_01 Conduct technical studies and environmental impact assessments Co-management150.000 A_01_02 Provide equipment and build cement wells in the village of Dosso Co-management400.000 A_01_03 Provide equipment and build cement wells in the village of Yelou Co-management650.000 A_02 Hygiene is improved 600.000 A_02_01 Provide equipment and build cement wells in the village of Dosso Co-management200.000 A_02_02 Provide equipment and build latrines in the village of Yelou Co-management350.000 A_02_03 Technical expertise Co-management50.000 Part Budget line Result

10. 10 1-THE BUDGET Similarity between the activities’ budget and the logical framework Parts (link 1–1) Results (link 1–1) Budget lines (LB)/activities Flexibility for the activities: link 1-1 or 1-n or n-1 or line for specific costs linked to the result

11. 11 1-THE BUDGET 1.3.2 Budget reserves: Part X Maximum 5% of activities’ budget By financial mode Strict use conditions Never direct imputation on reserves Use depending on agreement JLCB Unforeseen circumstances X Budget Reserve 108.000 X_01 Budget Reserve 108.000 X_01_01 Budget Reserve Co-management Co-management90.000 X_01_02 Budget Reserve State-managed State-managed18.000

12. 12 1-THE BUDGET 1.3.3 General means: Part Z 4 sections: Investments Staff Operational costs Audit and evaluation The sections are divided into budget lines E.g. international expert, administrative personnel

13. 13 1-THE BUDGET Z General Means 832.000 Z_01 Staff 645.000 Z_01_01 International expert State-managed400.000 Z_01_02 Local staff Co-management 245.000 Z_02 Investment 75.000 Z_02_01 Vehicles Co-management 30.000 Z_02_02 Equipment Co-management 40.000 Z_02_03 ICT Co-management 5.000 Z_03 Operating costs 90.000 Z_03_01 Office space Co-management 40.000 Z_03_02 Operating costs vehicles Co-management 10.000 Z_03_03 Communication Co-management 15.000 Z_03_04 Office supplies Co-management 20.000 Z_03_05 Other operatring costs Co-management 5.000 Z_04 Audit and Monitoring & Evaluation 22.000 Z_04_01 Evaluation State-managed15.000 Z_04_02 Audit State-managed7.000

14. 14 1-THE BUDGET –see attachment 1 Budget for project activities Budget Reserve General means Part Budget line Result

15. 15 1-THE BUDGET 1.4 Composition of the budget PROCESS: Formulation team: Technical and Financial File Validation by Finances Validation by partner and the Quality Control Committee (CCQ)

16. 16 1-THE BUDGET REQUIREMENTS: Based on a detailed analysis costs and hypothesis Narrative part Budget Clearly defined Not too detailed But sufficiently detailed to allow effective monitoring Amounts justified in TFF + detail of budget in annexes (justification of amounts: verification, validation, review)

17. 17 1-THE BUDGET EXAMPLE: Documents distributed Detailed budget TFF attached to TFF FIT Budget Work in groups of 2 Comments (open) See Annexes 2-3

18. 18 TRAINING’S OBJECTIVE The participant will be able to manage his/her activities throughout the project while respecting the validated budgetary framework and the procedures that are in force at BTC; he/she will be able to Define BTC’s budget concept Analyse the budgetary state of affairsAnalyse the budgetary state of affairs Propose budget changes following budget monitoring analysis according to BTC’s directives Calculate the available budget balance

19. 19 2-BUDGET MONITORING 1.Objectives of budget monitoring 2.Process of budget monitoring 3.Analyse a budget follow-up 4.Points of attention 5.Risks 6.Examples of decisions

20. 20 2-BUDGET MONITORING 2.1 Objectives Tool for financial monitoring of a project Are the budget limits respected? Which means are still available for the realization of activities? Are the funds being used well? Tool to monitor the progress of a project Indication of the state of progress of a project

21. 21 2-BUDGET MONITORING Tool for internal and external communication about the project’s results Intermediary reports for project management, the co- workers, the local partners, the beneficiaries, JLCB, the donors… Tool for analysis and support in decision-making Proceed to a budget change? Anticipate a request for project extension? Adapt the activities, revise the objectives? Realize cost savings…

22. 22 2-BUDGET MONITORING 2.2 Process Process: See Q Platform 1.The budget monitoring reports are published 2.The budgetary state of affairs is analysed by the project 3.The necessary actions are decided and implemented by the project 4.The budget execution status is analysed by the Representation 5.Following the analysis performed, the Representation discusses the budget execution status with project management

23. 23 2-BUDGET MONITORING Regular follow-up needs to be set up at project level At least once every quarter (before or during the FP) Once a month during the last 6 months of a project Written summary of the conclusions of the budget monitoring Provide a formal moment of reporting with the project’s team (TA + FIN/ADMIN team + operational PO) Action plan of possible actions to undertake (adaptation of activities, cost savings, budget change, extension…) Regular follow-up of this action plan to be agreed on and exchange with the Representation.

24. 24 2-BUDGET MONITORING 2.3 Analyse a budget follow-up Aim: Compare the project’s budget with expenses and commitments Different types of reports exist in function of the desired analysis Conditions for good monitoring: The data are available in time, they are correct, complete and correctly converted into €

25. 25 2-BUDGET MONITORING Budget amount Financial mode per budget line Total of expenses since the beginning of the project till the end of the previous year Date of the latest accounting closing taken into account Expenses of the current year Total of expenses since the beginning of the project and till the end of the last closed month Budget balance per budget line % of execution since the beginning of the project

26. 26 2-BUDGET MONITORING Balance of the commitments Available balance, commitments deducted % execution, commitments excluded % execution, commitments included

27. 27 2-BUDGET MONITORING 2.4 Points of attention Analysis of amounts (pertinence, completeness (all PHQ included), coherence (general means), efficiency of the use…) Make the link with operational planning Analyse detected or potential overspending (per line and financial mode) distinguishing the activity part from the general means part Coherence of the imputations Take payment cycles into account (ToR, MP, ctrt, activity, invoice, payment) Bear current invoices and commitments in mind

28. 28 2-BUDGET MONITORING COMMITMENTS Commitment: Amount we keep in reserve on a specific budget line to pay future expenses Once the commitment is created, related expenses are charged to this commitment These expenses appear in current expenses Only the balance, i.e. initial commitment minus the expenses related to that commitment, is taken into account for budget monitoring

29. 29 2-BUDGET MONITORING 2.5 Risks What risks can occur in the case of an incorrect/incomplete budget follow-up? See Annexe 4

30. 30 2-BUDGET MONITORING 2.6 Examples of decisions Adjustment of the project’s scope Adaptation of the activities, results, intended objectives Cost savings Change of the budget (shift between budget lines, increase of budget) Request for project extension Measures to accelerate the realization of the activities

31. 31 TRAINING’S OBJECTIVE The participant will be able to manage his/her activities throughout the project while respecting the validated budgetary framework and the procedures that are in force at BTC; he/she will be able to Define BTC’s budget concept Analyse the budgetary state of affairs Propose budget changes following budget monitoring analysis according to BTC’s directivesPropose budget changes following budget monitoring analysis according to BTC’s directives Calculate the available budget balance

32. 32 3-BUDGET CHANGES 1. When does one need to proceed to a budget change? 2. Process of budget change 3. Budget change file

33. 33 3-BUDGET CHANGES 3.1 When? Increase of total budget Insufficient budget to meet the results foreseen Insufficient budget to realize the activities planned Shift between financial modes Insufficient means in one financial mode and too many in another one

34. 34 3-BUDGET CHANGES Modification of the budget’s structure Adjustments of the activities and/or results Adaptation of the amounts of the budget lines Use of the budgetary reserve The use of the reserves is formalized through a budget change proposal The proposal must be validated by the JLCB Never charge or plan expenses on this line!

35. 35 3-BUDGET CHANGES Shifts between budget lines Overspending on certain budget lines and deficit on other one(s) A budget change between budget lines within a part can only take place when one of the conditions below applies: Overspending on “general means” part; Detected/anticipated overspending of 10% of a general means section; The budget line (will) exceed(s) its amount - as formulated in the latest budget version – by more than 10% and this excess comes down to more than 1% of the total budget per financial mode.

36. 36 3-BUDGET CHANGES Exceptions to point 5 “Shift between budget lines” Budgets of the “expert fund” type: no modification needed (with the exception of budget increases or transfers between financial modes) The start-up JLCB could decide to set other rules if opportune (e.g. set the threshold at 15%) So, in those cases, overspending is authorized as it remains below the limits set, and therefore, there is no need to make any changes

37. 37 3-BUDGET CHANGES 3.2 Process 1. Budget change proposal 2. Verification of budget change 3. Analysis of the budget change proposal 4. Approval of the budget change proposal 5. Updating the database 6. Check of budget change

38. 38 3-BUDGET CHANGES 3.2.1 Budget change proposal A budget change proposal is prepared and motivated Final objective: Making sure that the numbers presented to JLCB are correct! Means: Prepare the proposal methodically, share it and discuss it between projects and Representation Tool: template “Budget change proposal” Timing to respect: All preparatory documents must be transmitted to the Representation 3 weeks before the JLCB meeting for verification and validation Exception: In case of a budget increase, the proposal for increase must be submitted at least 1 year before the end of the project except in case of clearly justified unforeseen circumstances

39. 39 3-BUDGET CHANGES 3.2.2 Verification of budget change The budget change proposal is verified for: Its necessity (Do we need to make the change?) The correctness and the completeness of the numbers Its form (transmission of all documents required)

40. 40 3-BUDGET CHANGES 3.2.3 Analysis of the budget change proposal The budget change proposal is analysed at a JLCB 3.2.4 Approve the budget change proposal The budget change proposal is approved at a JLCB

41. 41 3-BUDGET CHANGES 3.2.5 Updating the database The project database is updated 3.2.6 Check of budget change The budget change registered in the database is checked

42. 42 3-BUDGET CHANGES 3.3 Budget change file Use the “Budget change proposal” model Type of budget change concerned Narrative justifications Annexes: Report “Follow-up and new budget proposal” Budget balance calculated according to treasury method List of commitments If there is a transfer between financial modes, budget increase and change in the state-managed part of a budget including PHQ, also State of received transfers validated by HQ Forecast of payments received by HQ State of balance of project’s accounts See Annexe 5

43. 43 TRAINING’S OBJECTIVE The participant will be able to manage his/her activities throughout the project while respecting the validated budget framework and the procedures that are in force at BTC; he/she will be able to Define BTC’s budget concept Analyse the budgetary state of affairs Propose budget changes following budget monitoring analysis according to BTC’s directives Calculate the available budget balanceCalculate the available budget balance

44. 44 4-CALCULATE THE BUDGET BALANCE Aim: Being capable of estimating, on a certain moment during a project, the available balance of a budget Two possible methods: Budget monitoring versus treasury method Approximate balance versus exact balance Providing different results! Crucial exercise during the last year of a project

45. 45 4- CALCULATE THE BUDGET BALANCE 4.1 Explain the budget monitoring method Principle: Based on executed expenses All the amounts are converted into € (open advance and account balance in USD are converted afterwards)  Deviations of conversion possible

46. 46 4- CALCULATE THE BUDGET BALANCE Method: Budget – expenses = available balance - balance of the commitments = available balance for future commitments

47. 47 4- CALCULATE THE BUDGET BALANCE 4.2 Explain the treasury method Principle: Based on the treasury of a project Takes into account the transfers and payments from headquarters (PHQ) Bears in mind the bank and cash register balances Points of attention: All the amounts are in € No deviations of conversion of currencies

48. 48 4- CALCULATE THE BUDGET BALANCE Method: Total of budget - cash calls received - payments by HQ = available balance for future cash calls AND payments by HQ + bank and cash register balances + open advances = available balance - balance of the commitments = available balance for future commitments

49. 49 4- CALCULATE THE BUDGET BALANCE 4.3 Exercises Calculate the budget balance according to the budget monitoring and the treasury method See Annexe 6

50. 50 4- CALCULATE THE BUDGET BALANCE 4.4 Algorithm of exchange rates Aim: Eliminate significant deviations of conversion at the end of the project Developed by the BTC Automatic Exchange rate and conversion of currency at the time of approving the financial closing

51. 51 4- CALCULATE THE BUDGET BALANCE Bear in mind: Actual exchange rate applied by the bank for cash calls and transfers Amount of cash calls and transfers Moment on which these cash calls and transfers are performed Account balances in currency and their counter value in euros during the cash call Reimbursements of converted advances at the exchange rate of the advance