1. Operationalizing the workplan and budget STOP TB workshop 14 December 2005

2. OUTLINE 1- The budget and workplan process overview 2- Global Fund policy on budgets and workplans 3- Budgets and workplans: approach and presentation 4- Issues in setting budgets and workplans 5- Global Fund budget review process 6- Miscellaneous issues Slide 2

3. Grant process key dates Proposals Submitted 1.3 Screening Eligible Proposals Selected 1.4 TRP Review TRP Recommend ations TRP Chair/Vice Chair Sign-off (Final Board Approval) 1.5 Board Approval 1.6 TRP Clarification (as required) Call for Proposals 1.1 Future Round Planning 1.2 Guidelines for Proposal Refinement & Call for Proposals Board Approval I. Proposals Management Board Approval Grant Start Grant Renewal (2 years) Grant End (up to 5 years) The Global Fund grant process Grant Signing 2.1 CCM Confirmation of PR Nomination PR Nomination Confirmed Grant Signing & First Disbursement 2.2 LFA Selection and Contracting II. Grant Negotiation and First Disbursement Grant Negotiations 2.4 Review of Budgets, Workplan, and Indicators 2.5 Negotiation (including conditions precedent) 2.6 First Disbursement Preparation LFA Contracted 2.3 PR Assessments 18 months since first disbursement 3.3 Phase 2 Grant Renewal Process Updated Grant Agreement 3.5 LFA Management Phase 2 Go/No Go Decision 3.4 Grant Extension 3.6 Grant Support Performance-based Funding 3.1 Ongoing Reviews & Disbursements 3.2 Grant Revisions III. Performance-Based Funding and Grant Support Performance-based Funding 3.1 Ongoing Reviews & Disbursements 3.2 Grant Revisions End of Phase 2 Support ARCH/300704/3 Slide 3

4. Budget and workplan steps to grant signing Grant Proposal Board Approval Grant Cycle Board approves grant budget upper limits Budget and workplan aspects Grant signing FMS Assessment Budget and workplan review Grant Conditions TRP Clarifications TRP reviews budget TRP review Approx timeline Budget prepared to support proposal TRP requests PR for further information 8 weeks3 weeks 4 weeks (cat 1) 5 ½ months (2) 3 months av Max. 6 months from board app Slide 4

5. From proposal to workplan and budget Proposal  Assumptions are based on the overall strategy of the given health intervention  Large elements of the detailed operationalization will not have yet been decided  Increasingly proposals contain more budget information than before Workplan: What is the Global Fund workplan?  No specific format but acts like any other plan  Converts the proposal and overall strategy into a workable, coherent plan which provides accountability of action  It is based on real assumptions and risks. It harmonizes program targets with realities of implementing activities eg procurement, resource availability Slide 5

6. From proposal to workplan and budget Budget  Also no defined format, usually part of the same document as the workplan  Puts the financial realities to the workplan (operationalizes the workplan)  Ensures accountability of implementation  The workplan and budget are living documents. They will be changed over time. Slide 6

7. Budget and workplan policy  TRP reviews technical merit of proposals and may seek clarifications which impact budget  A budget reduction at the TRP stage is, by default, reduced from the board approved 2 year amount  Budget and workplan should be broadly in line with the approved proposal (as adjusted by TRP issues raised)  Budget and workplan can be in the same document. If not, they should clearly reconcile  There is no firm policy on the format of budgets and workplans.  Preference for the budget to follow the program objectives and therefore be activity based  Budget periods Slide 7

8. Budget and workplan policy (2): exceptional situations  What if?:  There are major changes in macro-economic or programmatic issues between the proposal and grant signing which may result in major changes to the budget and workplan?  Examples: major foreign exchange swing, changing the real value of the approved amount civil strife or other force majeure there is new information on treatment methods with a material budgetary and planning impact  If impact not material, proceed as normal  If impact material PR can apply for re-programming (discussed later) Slide 8

9. Budget and workplan presentation and approach  Overall approach to preparing budget and workplan Bottom up? Top Down? Whats in the envelope? Trial and error? Cost based? Activity based? Slide 9

10. Budget and workplan presentation and approach (2)  Example budgets and workplans  Activity based budget and workplan recommended following objectives and SDAs from the proposal Proposal template Grant agreement Detailed budget and workplan  Example workplan and budget setting process in practice. Slide 10

11. Activities rollout. Budget prepared to support activities. Budget and workplan presentation and approach (3) Activities Budget and workplan aspects Activities Approx timeline Q1 (3 months)Q2 (3 months)Q3 (3 months) Q4( 3 months) SDA1 SDA2 SDA3 Objective Indicators & Targets Indicators & Targets Indicators & Targets Indicators & Targets As per M&E plan and Attachement As per proposal Slide 11

12. Budget and workplan presentation and approach (4): good practice  Good budget and workplan sets good impression  Makes review and analysis easier which can mean better decision making  Be transparent  Do not be scared to provide more detail rather than less  Model should be very clear; narrative review/explanation will be positively received  Keep your portfolio manager informed. Raise concerns early and articulate them clearly  Ask the portfolio manager for advice  Develop good working relationship with LFA – understand their needs  AIDSPAN booklets www.aidspan.org Slide 12

13. Budget and workplan presentation and approach (5): not so good practice  Taking the exact same budget as was contained in the proposal – unless for very good reasons  No narrative  Assumptions not clear  Envelope approach (eg balancing figures dumped)  Dropping SDAs, activities without explanation  Being unrealistic  Not reconciling the various interlinked activities eg equipping should precede implementing  Not questioning excessive costings  Not reviewing what has been prepared Slide 13

14. Budget and workplan issues for grant signing The right budget Proposal budget TRP review outcomes Macro economic factors Secretariat review outcomes Grant specific factors Presentation issues Slide 14

15. Budget and workplan issues : the proposal and TRP clarification process  Round 5 proposal instructions contained fairly specific budgeting requirements  TRP reviews the technical merit of the proposal  Budget is presumed to be indicative  Detailed attention to budget by TRP is limited by time  The clarification process may or may not include issues relevant to the budget and workplan  Where there are workplan and budgetary implications the PR should demonstrate how it has taken account of them Examples… Slide 15

16. Budget and workplan issues: macro- economic factors Foreign Exchange  No specific policy on foreign currency issues other than that grants may be denominated in USD or Euros  In budget setting use best estimates of exchange rates  Make clear assumptions on USD or euro relationship with local currency: eg does USD purchasing power parity apply?  Make clear assumptions on currency base of budget items: are budget items denominated in USD or local currency? Inflation  Inflation: is there an underlying local inflation trend which is separate from that caused by devaluation of the local currency Slide 16

17. Budget and workplan issues exercise: macro- economic factors (2) Discussion exercises: 1.Choosing the right exchange rate and inflation factors in Ruritania 2.Significant local currency exchange rate appreciation: what approach to take? Slide 17

18. Budget and workplan issues: macro- economic factors (3) – taxation  Global Fund policy  Quote from the grant agreement  General approach: Tax clearance certificate before grant signing Material amounts of tax paid are quantitied and reduced from following disbursement  Occasionally waived if not material eg VAT on local petty cash purchases  What if the tax is only recoverable in future?  What if the tax authorities refuse to exempt the PR from tax? Slide 18

19. Budget and workplan issues: grant specific – procurement issues General approach:  Procurement plan including quantities and prices not always available  Use best available information and document assumptions  Key issues  Material changes between proposal and grant negotiation  Timing issues  Planning other resources which are dependent on procurement Slide 19

20. Budget and workplan issues: grant specific – procurement issues (2) Example for discussion:  What do you do if: The price of xxx drugs increases by 30% between proposal and grant negotiation and the drug component of the grant represented 40% of the grant in the proposal budget. Do you:  just decrease the treatment targets in line with the increase in unit costs and avoid adjustments to other SDA’s?  hold the targets as they were in the proposal and cut other activities?  cut all activities evenly (ie pro rata to the increase relative to the whole budget)?  look for other areas of potential saving and first offset the cost increases against those, then negotiate with the GF on targets?  Look for other sources of funding? Slide 20

21. Budget and workplan issues : grant specific – overlapping grants  Where separate rounds may overlap geographically and programmatically  Presently each grant stands alone for financial reporting purposes  The budget preparation should avoid possible double counting  Grant rationalization is under discussion. Recommended interim steps: Reporting dates Financial reporting system Align financial reports LFA work Slide 21

22. Budget and workplan issues : Global Fund review  Review process  LFA review, scope of work  Example reviews  Secretariat reviews, roles and responsibilities Slide 22

23. Budget and workplan issues : grant negotiation/ LFA assessments  LFA assessments may raise issues with budgetary implications  The Secretariat may raise issues with budgetary implications  What if the changes cannot be delivered with the budget available? Discuss Slide 23

24. Budget and workplan issues : grant specific – Miscellaneous issues  CCM costs  Sub-recipients  Administration and overhead costs  Budget revision Slide 24