United Nations Development Programme

RR Induction

New York – 14 July 2015

“Managing the financial sustainability and effectiveness of country offices in a declining

resources environment”

Quiz – True or False Please support your answer with facts.

1. XB is credited to UNDP at the moment of receipt of funds from the contributor/donor. 2. GMS can be negotiated with the partner depending on the actual cost of implementing a project. 3. GMS should be sufficient to implement a project; DPC is optional.

4.       UNDP’s cost recovery policy has clearly defined General Management Support (GMS) as method of recovering management support cost from non-core funded projects and programme.  Therefore it is double dipping to charge both GMS and Direct Project Cost on the same project 5. Resident Representative has the sole authority to authorize the use of country office extra-budgetary:  TRUE or FALSE?  6. Resident Representative has the authority to approve budget override (expenditure without resources) without seeking clearance from HQ:  TRUE or FALSE?

United Nations Development Programme

□ Survival Guide: Key documents

□ Funding Streams

□ Case study: MICLandia• Integrated Work Plan (IWP) • UNDP Funding Streams• Integrated Resources Management Framework (IRMF)• Key financial metrics: (Delivery trends, XB projections, Pipeline,

Office structure and management costing)• Direct Project Costing – DPC • Critical question on financial sustainability

□ Conclusions

Overview

IWP – Resource and overall overview

1

Survival Kit – Key documents

2

UNDP Funding stream mechanisms

3

Types of activities Types of costs

Development Effectiveness

Recurring costs

Non recurring costs

UN Development Coordination

Non-UNDP/Capital Investments

ProgrammeDevelopment activities

Management activities

UN Development Coordination

Special Purpose

Programmatic Components

Institutional Components

Per harmonized decision in EB document DP/2010/3, decision 2010/2.Total: $22.6 billion

Estimated total expenditure in 2014-2017

$20.1 billion

Funding streams – Funding Typology

4

MICLandia Financial Data: Programme & Structure

5

Key figures & ratios - IWP projections amounts in $000

Development resources (Programme + DE) Breakdown Delivery Amount (%)Projected Programme Delivery $17,228 Non-Core Delivery $16,390 95%Total budgeted amount $28,167 Core Delivery $838 5%Total available resources $22,123 Core/Non-core ratio 5%Programme Delivery % 61.2%

Institutional resources (Management + DE) Office cost type Amount (%)Management ratio % (mgmt/total) 10% Total staffing $1,385 61%Management Core/Non-core ratio % 27.8% Total GOE $900 39%Office Structure Cost $2,285 Staffing MGT $332 15%GMS earned $608 Staffing DE $256 11%Other cost recovery $345 Staffing XB $797 35%XB Income vs Utilization ($584) GOE MGT $96 4%XB Balance at EOY $1,595 GOE DE $64 3%XB Reserves (months at EOY) 12 GOE XB $740 32%

MICLandia: IRMF Snapshot

6

2015 Approved Budgets as of 26 June 2015:

$28,438K

Total: $20,488K

Development Expenditures

Projection

Actual expenditures as

of 26 June 2015: $7,956K

Expenditures yet to be realized: $8,434K

Total: $16,390K

Opening cash balance: $11,393K

Total: $27,191K

Projected income yet to be

mobilized:$5,928K

Cash received as of 26 June 2015: $4,705K

“To be by

July 2015”Noncore contribution

Projection$15,798K

Allocation received (BPPS controlled Vertical

Funds) as of 26 June 2015: $5,165K

The figures below indicate your targets!

IRMF: MICLandia – Simulation to reach targets

7

Note: Income and expenditures follow 2014 monthly patterns, with income lifted by the requisite % to meet the Brx 2015 projection of $15,798K and expenditures lifted by the requisite % to meet the Strategic Plan target for MICLandia of $16,390K.

Mar Apr May June July Aug Sept Oct Nov Dec

2015 noncore in-come to be col-lected to meet Brx pro-jec-tion

6063509.45 7018844.47 7237594.47 9870559.37 7997437.11067282

8082406.62272068

8155592.70790867

8302157.76273151

9999668.86547538

15798907.2865

2015 ap-prove budget needed to meet Brx tar-get

26739245.2 26816059.81 28095766.91 27091169.15 20487500 20487500 20487500 20487500 20487500 20487500

2015 Ex-pendi-tures needed to meet Brx Target

2908602 4395416.82 5319348.26 7543493.98 11137769.95255

12565984.51768

14009842.70958

14991423.4447

15687598.09258

16393167.99233

2,500

7,500

12,500

17,500

22,500

27,500

MICLandia

Th

ou

san

ds U

SD

Historical Delivery trends

8

Development resources: Trend analysis for core and non-core resources amts $000

2012 2013 2014 2012 2013 2014Available resources 27,442 26,219 25,043 1,241 1,365 1,040 Receivables 740 740 642 - - - Total resources 28,181 26,959 25,685 1,241 1,365 1,040 Budget 19,404 18,643 16,458 2,306 1,860 1,115 Utilization 16,091 15,382 12,546 1,244 1,028 907 Past due receivables - - - - - - Utilization rate (%) 83% 83% 76% 100% 75% 87%

NON-CORE RESOURCES CORE RESOURCES

How would you do things differently for this year?

Delivery projections

9

Development resources (Programme + DE) Breakdown Delivery Amount (%)Project Programme delivery $17,228 Non-Core Delivery $16,390 95%Total budgeted amount $28,167 Core Delivery $838 5%Total available resources $22,123 Core/Non-core ratio 5%Programme Delivery % 61.2%

Pipeline Management

10

Strategic: Substantive relevance in programme portfolio (both Regional and Global)

Criteria Questions + -

1. Demand for services Evidence of need for project?

2. Enabling environment Evidence of conducive local environment? Risks?

3. Availability of UNDP substantive expertise

Within a UNDP core area of expertise?

4. Availability of critical partners?

Implementing partner/s? Substantive partner/s? Funding partners?

5. Degree of development

Defined project strategy, results & activities

6. Other sets of criteria and questions

Class BSoft Pipeline

Class C – Ideas

Set-up in ATLAS Project Management

Maturity level

Discounted factor

Certification of projections

Application multiyear budgeting

Linkage to CO CPD

Linkage to the SP outcomes and outputs

Maturity test to define Pipeline Class Different Pipeline Classes

ATLAS Finance

Executive Snapshot

Financial: Financial sustainability through accurate resources projections

Pipeline – MICLandia’s overall picture

11

2014 2015 2016 2014 2015 2016 TOTAL

Total 220,000 0 0 1,995,000 8,640,000 7,245,000 $18,100,000

Class A 100,000 0 0 1,095,000 900,000 900,000 $2,995,000

Class B 0 0 0 500,000 4,090,000 3,845,000 $8,435,000

Class C 120,000 0 0 400,000 3,650,000 2,500,000 $6,670,000

Core Non-core

Pipe

line

outs

ide

ATLA

S

Amounts in $m

Pipeline gap between data outside ATLAS

and data inside ATLAS

Pipe

line

insi

de A

TLAS

Funding streams – Overall picture

12

What do the funding streams mean for your office?

amounts in $000

Type of Resources2015

Resources

Future year

ResourcesTotal

Resources 2015

Budget Future year

BudgetsTotal

Budgets

Unprogrammed

Resources Utilization

Available Resources

Balance (a) (b) (c=a+b) (d) (e ) (f=d+e) (g=c-d) (i ) (j=c-f)

Core TRAC 1 & 2 - 04000 720 315 1,035 873 - 873 163 240 796 Engagement Facility - 04400 26 - 26 36 - 36 (11) 16 10 Other Programme & DE Core 113 - 113 103 25 128 (14) 49 65 Non Core IOCS - 11888 758 - 758 157 - 157 600 13 745 Engagement Facility - 11999 0 - 0 - - - 0 - 0 Third Party Cost sharing - 30000 762 - 762 875 53 928 (167) 192 570 EC Cost sharing - 30079 850 - 850 1,651 - 1,651 (801) 588 262 Government Cost sharing - 30071 13,723 - 13,723 19,915 5,608 25,524 (11,800) 4,874 8,849 TF resources (Thematic, EC, vertical) 50 - 50 107 - 107 (56) - 50 Vertical funds (GEF - 62xxx) 5,121 1,094 6,214 4,450 5,954 10,404 (4,190) 2,315 3,899

Core Management Core - 02300 428 - 428 662 - 662 (234) 233 194 DE for IB - 02550 320 - 320 335 - 335 (15) 156 165 Non Core Regular XB - 11300 1,310 - 1,310 2,199 - 2,199 (890) 866 443 Strategic XB - 16700 671 - 671 - - - 671 - 671

Deve

lopm

ent r

esou

rces

Insti

tutio

nal

reso

urce

s

Funding streams – Donor profile

13

amounts $000

Donor Donor DescrOpening Balance

Collected Revenue Receivables

Total Contributions

(a) (b) (c ) (d=a+b+c)Various Government Cost Sharing 9,896 3,831 - 13,727 10003 Global Environment Facility 4,674 - - 4,674

Various European Union Cost Sharing 529 320 508 1,358 10714 Multidonor Trust Funds 7 553 - 560 10009 Montreal Protocol 406 - - 406

Various Other donors 286 - - 286

Do you foresee any new potential donors?

Office cost structure: Key statistics

14

GOE Breakdown

Institutional resources (Management + DE) Office cost type Amount (%)Management ratio % (mgmt/total) 9% Total staffing $1,385 61%Management Core/Non-core ratio % 34.6% Total GOE $900 39%Office Structure Cost $2,285 Staffing MGT $332 15%GMS earned $608 Staffing DE $256 11%Other cost recovery $345 Staffing XB $797 35%XB Income vs Utilization ($584) GOE MGT $96 4%XB Balance at EOY $1,594 GOE DE $64 3%XB Reserves (months at EOY) 12 GOE XB $439 19%

Staffing BreakdownNo Direct Project Costing

Including Service contractors

Office cost structure: Dos and Don’ts

15

Multifunding (Use of different funding sources) of P5s or below positions Apply the ratio 84: 16 to the office costs (84% for staffing and 16% for GOE) Recovery of costs incurred by services provided to agencies and projects Functional alignment of positions based on performed functions Use development resources to fund staffing and GOE – Direct Project Costing

Exceed the institutional resources’ allocations Have excessively high management ratio (Corporate Integrated Resources

and Results Framework – IRRF targets 8.1%) Multifunding of D1s and above positions Extrabudgetary reserves below 12 months without a recovery strategy

Office cost structure

16

amounts in $000

Fund Code Description Type

Cost Classific

ation D1 NOC NOB NOA G7 G6 G5 G4 G3 G2 G1Total Posts

Total Cost (%)

2300 RR Prog Sppt Country Offi ces Core MGMT 1 1.00 277 12%2300 RR Prog Sppt Country Offi ces Core PROG 0.7 0.70 55 2%2550 Development Effectiveness-BSB Core DE 1 1 2.00 256 11%

11300 OR Services Fees Non-Core MGMT 2 1 1 1.3 1 2 8.30 797 35%4500 Prog Sppt Res Coord Line 3.1.2 Core UNC 1 1.00 141 6%

68100 FSO budget through UNSECOORD Non-Core SP 1 1.00 81 4%

Staffing Cost excluding RC Office and UNDSS 1.00 3.00 - 1.00 2.00 2.00 1.00 - 2.00 - - 12.00 1,385 61%

Structure Cost including RC Office and UNDSS 1.00 3.00 1.00 1.00 2.00 3.00 1.00 - 2.00 - - 14.00 1,607 70%

2300 RR Prog Sppt Country Offi ces Core MGMT 96 4%2550 Development Effectiveness-BSB Core DE 64 3%

11300 OR Services Fees Non-Core MGMT 740 32%

GOE costs for the full structure 900 39%

OVERALL OFFICE STRUCTURE COST 2,285 100%

Is this the office structure you require and can afford?

Historical XB and 2015 projections

17

XB Snapshot: Trends and 2015 projections amounts in $000 & reserve in months

Income Utilization Reserves2012 (Actuals ) 1,051 672 40 2013 (Actuals ) 919 918 29 -13% 37% -28% 2013 vs 20122014 (Actuals) 907 942 28 -1% 3% -3% 2014 vs 20132015 ( IWP Projections) 953 1,537 12 5% 63% -56% 2015 vs 2014

XB burning rate: Trend analysis & breakdown income and utilization amounts in $000

GMS UPL Other income Staffing costs GOEClosing Balance

Income vs Utilization

2012 (Actuals ) 659 389 3 358 314 2,230 3792013 (Actuals ) 552 365 2 434 484 2,236 12014 (Actuals) 569 315 23 447 495 2,179 (35)2015 (IWP Projections) 608 345 - 797 740 1,594 (584)Trend 2014 vs 2013 3% -14% 1010% 3% 2% -3% 4429%Trend 2015 vs 2014 7% 10% -100% 78% 49% -27% 1565%XB data is only accounted for the fund code 11300 - other XB fund codes are excluded

Income Utilization ReservesTrends

Basis for the trend

What is the recommended healthy level of extra-budgetary resources? Why are extra-budgetary resources important to the office structure?

2015 XB projections

18

Amounts in $000

A. Opening Balance 2,179

B. Income 953 GMS (F&A and Off-the-top) 608 ISS (Legacy Projects) 300 Agency Services 45 Other XB income -

Total Available XB Income (A+B) 3,131

C. Expenditure 1,537

Staffi ng costs 797 GOE 740

D. Transfers (inflow (+) & outflow (-)) -

E. Closing balance (A+B-C+D) 1,595

XB Reserves in months 12

Current projections

Direct Project Costing (DPC)

19

DefinitionOrganizational costs incurred in the implementation of a development activity or service that can be directly traced and attributed to that development activity (projects & programmes) or service

ObjectiveReflect in the appropriate project budget the true direct costs of achieving the development results and objectives funded from regular (core) and other (non-core) programme resources.

Eligible costs

Reflect in the appropriate implementation support activities Development Effectiveness activities directly related to ongoing

projects and country programmes, which include:• Strategic Country Programme Planning and Quality Assurance?• Programme Pipeline Development and Management• Programme Policy Advisory Services

Planning Inclusion of development effectiveness activities in the country

programme planning processes, at the project initiation Budgeting of DPC costs in project budgets with specific lines Inclusion of DPC costs in the Integrated Work Plan (IWP) each year

Direct Project Costing – DPC

20

Financial Sustainability

Cost Alignment

Workload study

as per 2013 Workload Studies as per FSE proposal from

COs

core IB to Dev XB to DEV Shift to XB/Dev RBA 15.2 10.4 4.94 RBAP 6.0 9.9 1.86 RBAS 3.3 6.5 0.66 RBLAC 5.0 9.0 1.42 RBEC 3.9 4.6 1.29

33.40$ 40.40$ 10.17$

Support to project (NIM/DIM) implementation in operational activities (HR, Procurement, Finance, Admin, etc.)

Development effectiveness (DE) support to programme implementation (Policy/Strategic Advisory, Quality Assurance, etc.)

Costs agreed with the Gov. at the initiation stage (design, formulation of the project, etc.)

Costs are integral part of the AWPs Regular workload studies to justify DPC Charge both staffing and GOE Applies ISS in parallel

Make profit Unsubstantiated distribution of institutional costs to

developments outputs By 2017, No XB resources to fund DE activities!

Utilization of multiple funding for P5s and below

Use of UPL or LPL Use of stand-alone project

Operations Programme

Workload results vs. CO submission Way forward on DPC

DPC MICLandia: Core workload study results

21

For activities reported above, sub-activities under 1a and 2c that equal to $340k or 37% of Institutional Budget resources should be directly charged to projects. For Region X, $5.0m or 32%, and for all UNDP submissions, $33m or 31% of Institutional Budget resources should be directly charged to projects based on the workload study.

Distribution by Activities as reported by staff in MICLandia - Institutional Budget total staff cost = $919k

Proposed/Correct Distribution of staff resources

Programme Activities- 1a, $246

27%

DE - 2a$32 3%

DE - 2b$85 9%

DE - 2c$94 10%

UN Coordination$216 24%

Management, $246 , 27%

(In thousands US dollars)

Institutional Budget (IB)$579 63%

Project Resources$340 37%

(In thousands US dollars)

DPC MICLandia: XB workload study results

22

Proposed/Correct Distribution of staff resources

For activities reported above, sub-activities under 1a and 2c that equal to $131k or 31% of MICLandia resources should be directly charged to projects. For Region X, $9.0m or 42%, and for all UNDP submissions $40.4m or 40% of XB resources should be directly

charged to projects based on the workload study.

Distribution by Activities as reported by staff in MICLandia - XB total staff cost = $420k

Programme Activities-1a, $95

23%

DE - 2a$94 22%

DE - 2b$32 8%

DE - 2c$35 8%

UN Coordination$50 12%

Management, $113 , 27%

(In thousands US

XB Resources$289 69%

Project Resources

$131 31%

(In thousands US dollars)

Financial sustainability question

The cost of your office structure amounts to $2.3 million and you plan to use about 70% ($1.6 millions) of your extra-budgetary (XB) resources to fund this structure – please refer to slides 14, 16 and 18. As a result, your XB reserves are depleting which raises the question of your office financial viability in the short term.

23

In order to ensure your office financial sustainability, are you going to mobilize more resources and boost your delivery or reduce your office structure?