1. Copyright 2010, The World Bank Group. All Rights Reserved. Budgeting Statistical Projects Section A 1

2. Copyright 2010, The World Bank Group. All Rights Reserved. Budgeting The development of detailed cost estimates for each task in order to prepare a realistic estimate of the total cost of the project 2

3. Copyright 2010, The World Bank Group. All Rights Reserved. Three Stages of Project Budget Initial rough estimate during development of project scope statement Detailed budget as output of detailed work plan Final approved budget - baseline 3

4. Copyright 2010, The World Bank Group. All Rights Reserved. Types of Costs Direct costs are costs that are directly attributable to the project Indirect costs are costs that cannot be traced directly to the project 4

5. Copyright 2010, The World Bank Group. All Rights Reserved. Calculating Indirect Costs Shouldn’t be a straight percentage of the total project budget Can be included as a percentage in salary rates Can be included as a percentage of project work days 5

6. Copyright 2010, The World Bank Group. All Rights Reserved. Uses of the Budget Demonstrates types of costs and amount required Shows donors the resources required Provides guidance for decisions on expenditures Helps in measuring project progress Highlights project problems and/or waste 6

7. Copyright 2010, The World Bank Group. All Rights Reserved. Characteristics of a Budget Reflects overall project plan Based on workloads, rates of production, and personnel Includes equipment, facilities, and supplies Accounts for factors that may impact future costs Prepare for each operation in detail on a fiscal year basis 7

8. Copyright 2010, The World Bank Group. All Rights Reserved. 1. What are the effects of underestimating costs when preparing a budget? 2. What are the effects of overestimating costs when preparing a budget? 8

9. Copyright 2010, The World Bank Group. All Rights Reserved. Donor Requirements What types of activities and costs are they likely to fund? What budget formats do they prefer? How large are the grants they can give? What currency do they use? 9

10. Copyright 2010, The World Bank Group. All Rights Reserved. Estimates of Costs Survey Phase:% of Total Survey Costs: 1. Planning/negotiation……………..… 15% 2. Survey preparation…………………..25% 3. Field implementation……………….. 25% 4. Data analysis…………………………15% 5. Reporting/presenting results…..… 20% TOTAL COSTS………………… 100% 10

11. Copyright 2010, The World Bank Group. All Rights Reserved. Contingency Funding Should not be fix for poor budgeting Estimate risks at task/activity level Assign a percentage to each identified risk based on likelihood Review overall contingency percentage against other projects 11

12. Copyright 2010, The World Bank Group. All Rights Reserved. Scope Creep The sponsor asks for more after the scope statement has been approved Calculate the detailed impact of changes on the project plan and budget Explain in detail how quality, timeliness and cost will be affected All changes must be tested prior to implementation 12

13. Copyright 2010, The World Bank Group. All Rights Reserved. Summary Versus Detailed Budget A summary budget presents subtotals for the major cost categories. It allows one to tell at a glance the relationships among items. A detailed budget shows how these subtotals were calculated for the major items. 13

14. Copyright 2010, The World Bank Group. All Rights Reserved. Standard Budget Formats Easy to understand categories Increased accuracy Easy to monitor project spending Reduces review and approval times Facilitates comparisons and estimations 14

15. Copyright 2010, The World Bank Group. All Rights Reserved. Project Manager’s Role Be involved, informed and realistic Be aware of donor requirements Keep proper documentation Be detailed and complete 15

16. Copyright 2010, The World Bank Group. All Rights Reserved. Projecting Cash Needs There will be varying needs for cash for each phase of the project Use your detailed project plan and budget to forecast project cash needs in advance 16

17. Copyright 2010, The World Bank Group. All Rights Reserved. Sample Excel Budget Can combine detailed and summary budget Should show annualized data clearly Organization can follow project work plan Set up formulas to make quick adjustments or estimate the impact of changes 17

18. Copyright 2010, The World Bank Group. All Rights Reserved. Participatory Budgeting Not the job of one accountant alone Project staff should be involved Departmental staff should review, including: –Finance –Human Resources –Procurement 18

19. Copyright 2010, The World Bank Group. All Rights Reserved. Escalation of Commitment Ways to control escalation of commitment: Objective proposal review Regular and meaningful project status reports Project review meetings by a third party to assess project health Conduct a post project review 19

20. Copyright 2010, The World Bank Group. All Rights Reserved. Section A Quiz 1.List the three stages of a project budget 2.What are the two types of cost? 3.Should contingency funding be 50% of total project cost? 4.Should you change scope without reviewing the budget? 5.Who is responsible for budgeting projects? 20