1. WASH Enabling Environment Sector Budgeting and Financing

2. Learning Objectives By the end of this session, participants will be able to: Explain the importance of budgeting and financing to support the WASH EE Describe the framework for supporting financing Identify Support Process steps and actions to strengthen the budgeting and financing function for the WASH EE 2

3. Outline Learning Objectives Definition Context Outcomes and Indicators Activities WASH EE Support Process Scoring 3

4. Definition Budgeting refers to how much money is allocated to the sector, how much do you need to implement activities planned, and how much is spent and where Financing is the ability to raise funds from different sources to cover the costs included in the budget 4

5. Context: WASH EE Framework

6. Context: WASH EE Theory of Change

7. Sustainable Financing to assume different costs 7

8. General Approach to Budgeting and Financing 8 Budgeting and Financing Improving efficiency of allocated/available resources Making the case for additional resources Budgeting and allocation (budget process, decision points and fund allocation criteria, i.e., reaching the poor, software included) Tracking (efficiencies, absorptive and implementation capacity, use for intended results Use of models, costed plans to defend request for additional funds

9. Expected Outcomes Government has increased national and sub-national budget allocation for WASH services delivery Financial flows are adequate and predictable and meet national targets. Sector can attract different sources of funding Functioning public finance systems, public and private sector institutions and innovative mechanisms for resource mobilization for WASH engaged 9

10. Indicators The budget is adequate and disaggregated between each of the subsectors (rural, urban, water, sanitation) The budget and expenditure are publicly available Budget adequacy: there is enough recurrent expenditure to provide adequate support to the delivery of services there is enough capital expenditure to meet national water sector investment targets Financial flows are predictable Financial sources (3Ts: taxes, tariffs and transfers) and needs are known Legal and institutional frameworks exist for financial transactions to take place Public allocations to water and sanitation as % of GDP 10

11. Activities Advocate for: WASH budget analysis (the baseline of what the government is currently investing in the sector) Multi-year costing (total financing required to address WASH sector bottlenecks) Identify existing activities within budgets that could be modified or rescaled to deliver on WASH outcomes Financial gap analysis Influence budget cycle Promote and engage in WASH SWAps 11

12. WASH EE Support Process 12

13. Support Process Step 1: Agree What stakeholders do we engage to decide how to strengthen the Budgeting and Financing function? –Political counterparts –Technical counterparts What do we need to have stakeholders agree on? –Population: served and unserved? –Location: rural and urban? –Type of service to offer: basic or safely managed? Do we need to explore (new) funding sources? –TTT (Tariffs, taxes and transfers) –Water banks, Blue Fund, National Water/WASH Financing Facility 13

14. Support Process Step 2: Assess What needs to be assessed? Existing gaps/bottlenecks Current expenditures and patterns of expenditure (In)efficient use of WASH resources (In)equitable use of WASH resources Overall inadequacy of public investments in WASH Cost effectiveness How do you conduct the assessment? Determine what tools to use 14

15. Support Process Step 3: Plan Questions guiding the planning process: What kinds of costs need to be included? What technological options need to be considered? What infrastructure lifespan, software assumptions need to be adopted? What is the time frame for budget preparation? What equity concerns need to be addressed? How is budget transparency for accountability addressed? 15

16. Support Process Step 3: Plan (Technology Option Assumptions) 16

17. Support Process Step 3: Plan (Infrastructure Lifespan, Software & Assumptions) 17

18. Support Process Step 4: Invest Annual costs to reach universal sanitation and water coverage per SDGs focusing on the unserved by 2030 by service level and sub-sector 18

19. Support Process Step 4: Invest Questions guiding investment actions/decisions: What aspects should a financing strategy cover? What elements should a financial planning process cover? How do we turn finance into services for the future? 19

20. Support Process Step 5: Implement Agree on implementation responsibilities Systems to track expenditures in place Monitor expenditures Track burn rates Track differences between real and budgeted costs Implement the financial planning recommendations 20

21. Support Process Step 5: Implement Identify service demand and financing needs prior to engaging financiers Seek economies of scale by combining services and reduce service costs Finance strengthening activities Develop costing studies/investment plans using local unit costs, a mix of technologies, and program delivery mechanisms likely to be chosen Provide a geographical breakdown for numbers (subnational level, rural, urban and peri-urban area) Analyze factors that influence costs Design and implement to ensure quality and sustainability of new infrastructure, thereby reducing unit costs Source: Hutton and Varughese (adapted) 21

22. Implement: Rural Water Supply Create SWAps for rural water supply Address sustainability Scale up tested alternative professional management which leverage private sector capabilities Leverage private finance for piped water schemes through access-to-finance support services, targeted subsidies and concessional credit Improve application and enforcement of water quality guidelines and stimulate household water treatment for point-of-use safety 22

23. Implement: Urban Water Supply Prepare/support: Strategic investment plans and financing framework Water quality, service standards, regular revision of tariffs through trained independent regulators Autonomous utilities charging full-cost recovery tariffs, while improving operational efficiencies Public-private partnerships to facilitate access to commercial finance through a range of instruments (credit enhancements, targeted subsidies, investment climate) 23

24. Implement: Rural Sanitation & Hygiene Specify local government roles to deliver rural sanitation services Increase resources for sanitation services, especially for last mile delivery Adopt program methodologies that focus on collective behavior change to stop open defecation Build capacity Front-line workers for promotion Local governments for planning, implementation and monitoring Facilitate local private sector in rural sanitation service delivery Develop and scale-up monitoring systems that measure outcomes Use for rewards and incentives Strengthen equity focus through poverty reduction initiatives and/or targeted partial subsidies 24

25. Implement: Urban Sanitation & Hygiene Invest in fecal sludge collection, transport, treatment and safe disposal Address institutional fragmentation Clarify roles of agencies and service providers (such as combined utility approach) Develop urban sanitation strategies, master plans and financing framework e.g. address low recovery of costs through user fees Improve capacities for city-wide sanitation planning, with solutions beyond wastewater treatment Strengthen equity in outcomes and proposed investments 25

26. Support Process Step 6: Monitor & Evaluate Who is financing what, with what funding, for how long and with what effect Agree on monitoring approach and tools Harmonize indicators Set up monitoring process and system Monitor financing, investments, and program implementation Evaluate progress 26

27. Support Process Step 6: Monitor and Evaluate 27 Value for Money Model: The WASH Results Chain

28. Support Process Step 6: Monitor and Evaluate 28 5 Dimensions of Assessing Value for Money in WASH Programs

29. Scoring 29 CountriesBudgetingFinancing High percentage of domestic budget and official donor commitments earmarked for rural sanitation and hygiene is utilized Budget and expenditure data show separate values for rural and urban water and sanitation and hygiene, poor/vulnerable groups, domestic spending, and official donor investment Financial flows to rural and urban water & sanitation &d hygiene are sufficient to meet national targets, and include software costs, maintenance funds, disaster risk management and climate change Budget and expenditure data show separate values for rural, and urban water and sanitation and hygiene, poor/vulnerable groups, domestic spending, and official donor investment Cambodia Laos Myanmar Vietnam Weak/ Gaps Moderate Progress Good Progress

30. For more information, please contact David Tsetse, Ph.D. WASH Specialist, Planning Monitoring and Capacity Building Programme Division Tel: 917-265-4663 E-mail: dtsetse@unicef.org © United Nations Children’s Fund June 2016 Cover photo © UNICEF