1. Support Cost Recovery in WFP COST RECOVERY POLICY: HLCM-UNDG CONSULTATIONS April 4, 2008

2. WFP 100% voluntary funded Historically:  One-third contribution in cash to ‘regular resources’ for:  All transport and associated costs for development programme, and  and ALL support costs However, by the early 1990’s:  Development resources and associated cash were declining  Increasing emergency portfolio without overhead contribution  Serious funding problem for support costs  Support cost expenditure without secure resource levels Mid 1990’s:  Interim measure: support cost levied on emergency and relief operations  The need for each programme to be fully self financing was noted  Governing body established Formal Working Group to review options WFP Funding Background

3. New Policies Implemented  New policies implemented in January 1996  Based on Full Cost Recovery:  No more core resources / regular budget  All costs associated with the implementation of a contribution to be covered by that contribution: Contribution Food LTSH Ext Transport ODOC, DSC Full share of Indirect Costs Flat Indirect Support Cost Rate (ISC) Associated Costs

4. Support costs in WFP All donors expected to cover Direct support costs (DSC) [= Variable direct costs] –Part of Associated Costs –Project related –Donor covers actual costs incurred Indirect Support Costs (ISC / PSA) [= Fixed and Variable Indirect costs] – not assigned to any particular activity – recovered evenly from a fixed percentage deduction from all contributions

5. Indirect Support Costs Indirect Support Cost rate of 7% set in 2003 Approved by the Executive Board every two years with the adoption of the Management Plan (biennial budget)

6. 420 400 380 360 340 320 300 280 260 240 012345678 Operational Level in US$ Billion Excess ISC Income ISC Income = Expenditure Biennial PSA Budget ISC Income ISC Income Shortfall PSA/ISC Management - Illustration

7. Funding Policies - Illustration + General Fund 3: EXTRA- BUDGETARY RESOURCES Special Accounts Trust Funds 1: PROJECT [Timeframe: 6 months to 5 years] Approved Project Budget Contributions FULL COST RECOVERY Donation1Donation2Don. 3 Food1,000100200… External Transport90090180etc. Landside transport (LTSH)50050… Other Direct Op. Costs (ODOC)10010etc. Direct Support Costs (DSC)50050 Total Direct Costs3,000300 Indirect Support Cost (ISC) Charge – 7%21 Total Contribution321 2: CORPORATE [Timeframe: 2 years] ApprovedFunding (ISC) Biennial PSA400+21 + …. PSA Reserve (Equalization Account)