BUDGET ANALYSIS AND GCS GOVERNMENT COST SHARING Motivation

BUDGET ANALYSIS AND GCS GOVERNMENT COST SHARING

Motivation for GCS v Multilateral organizations such as UNDP are increasingly faced with a decline in traditional sources of financing for their country offices. v However, at the same time, many traditional recipients of donor financing have emerged into middle income status(MIC). v Nonetheless, these newly emergent economies are still faced with economic and social disparities because of an equal distribution of wealth and income described in their Gini Coefficient. v This opens the door for UNDP to provide traditional programming to promote the SDGs but with reliance on funding provided by the host government through government cost sharing arrangements and as applicable, at the subnational and municipal levels as well. v GCS will provide opportunities to achieve SDG and maintain country offices

WHAT DO GCS AGREEMENTS LOOK LIKE ? - HOW DO GCS WORK ? v Government cost sharing refers to government resources contributed towards a UNDP project, or programme area at the country level. Such an arrangement can exist between a UNDP Country Office and any branch of central, state or local government. A signed project document and schedule of payments with budget reflecting cost sharing elements constitutes the legal agreement between UNDP and government. v The role played by UNDP in GCS does not differ significantly from the role that UNDP has traditionally played in development cooperation Only the source of funding has changed v Resources received through government cost sharing are fully integrated into UNDP’s budget and are used in accordance with UNDP’s administrative rules and regulations. These resources are received locally and are considered a part of non-core resources of UNDP.

WHAT DO GCS AGREEMENTS LOOK LIKE ? - HOW DO GCS WORK ? What are UNDP Activities under Government Cost Sharing ? v In cost sharing modality UNDP agrees to assist in the management of government resources where the activities and application of those resources fall under the UNDP mandate including SDGs. The financing and execution of the activities remain in government control but the UNDP can provide support in: v Identifying development needs and objectives v Suggesting solutions to those needs engaging all stakeholders and building consensus on which to move forward. v Designing projects and programs to meet objectives. v Supporting in the implementation of agreed solutions as may be required. v Monitoring and Evaluating results. v v In addition it may be possible under a GCS for UNDP to provide inputs and services including administrative support and these activities may be more likely to be undertaken in non-government partnership for cost sharing.

WHAT DO GCS AGREEMENTS LOOK LIKE ? - HOW DO GCS WORK ? What are the Types of Activity under GCS ? v In Europe a UNDP Study has indicated that in 2008 -2012 “… the biggest share (68%) of total RBEC GCS were for downstream, infrastructure delivery and large procurement oriented projects. Specifically, 30% of GCS funding was for Large Infrastructure interventions, 27% for Downstream project activities and another 11% for Operational Support activities (including large procurement). Only 17% of such funds were used for Upstream Advisory services type of project, 7% for “coordination” support (work on behalf of the host government in implementation of complex programmes), 6% for Technical Assistance and Training and 1% for UNDP Advocacy activities. ” v Practise Areas at this time were mainly MDG and Poverty (38%) Capacity Development (23%) and Energy and the Environment (20%) v At the project level main areas were for Area based Development and Community Mobilisation (23%), Environment and Climate Change (22%) and Business Development and Employment (13%)

WHAT DO GCS AGREEMENTS LOOK LIKE ? - HOW DO GCS WORK ? Where are GCS Agreements Applicable ? - Upstream and Downstream Financing in GCS v. Within UNDP’s Europe Region 2008 -2012 30% of GCS went for downstream Infrastructure and 27% for downstream project activities and 17% for upstream advisory services with most of the balance for TA, operations and coordination support (35%).

WHAT DO GCS AGREEMENTS LOOK LIKE ? - HOW DO GCS WORK ? What is the Management Modality for GCS ? • The GCS modality is not dissimilar from the standard UNDP modalities under core or TPCS except that there is a change of donor. Most GCS are operated under NIM or a mixed NIM/DIM arrangement However DEX modality may be employed and be useful managing “downstream” project activities

WHAT DO GCS AGREEMENTS LOOK LIKE ? - HOW DO GCS WORK ? What is the Fee Structure for Cost Sharing ? v. Within a GCS the UNDP will receive a management fee based on the agreed upon capitalization value of the project, UNDP services provided and agreed rate of return to UNDP. Cost recovery rates in UNDP Europe Region have varied between 3% and 8 % which seems to be based on either negotiating skills or on the inability of UNDP to raise GCS rate above a minimum rate of return that had been established in prior GCS projects.

GCS REQUIRES FISCAL SPACE The concept of “fiscal space” is key to implementing GCS. Fiscal Space is the amount of funding available in the national or sub national government budgets to finance new initiatives such as GCS. Increasing fiscal space will be crucial to achieving SDG objectives. Typically Fiscal Space may be limited in new MIC. •

GCS REQUIRES FISCAL SPACE

GCS REQUIRES CREATING FISCAL SPACE ! Fiscal space for new initiatives can be increased by reducing or eliminating performance gaps 1. Increasing domestic revenues through increasing existing taxes. 2. Increasing domestic revenues by increasing the efficiency of tax collections 3. Increasing domestic revenues by exploiting new basis for taxation ideally within existing legislation 4. Decreasing costs by increasing the efficiency of existing programs so that program or Ministry objectives can be achieved at a reduced cost in consideration of the program objectives 5. Decreasing costs by increasing costs efficiencies through reducing or eliminating those programmes and their activities which are not concerned with strategic objectives or are poorly performing.

USE BUDGET ANALYSIS TO CREATE FISCAL SPACE !

TWO TYPES OF BUDGET ANALYSIS GENERAL BUDGET ANALYSIS 1. Based on The Current Budget Proposal and past approved expendituresa. Identify Sector Specific Performance Gaps in NDG, PEFA and PFM- b. Identify expenditure gaps c. Identify trends in expenditure components d. Identify performance or expenditure gaps in related Government capital projects e. Determine if trends in expenditure and capital spending support National Development Goals 2. Identify Gaps caused by Fiscal Risks and Tax Expenditures 3. Identify Opportunities for Revenue Broadening and Strengthening a. Identify revenue gaps b. Identify opportunities for revenue strengthening c. Identify opportunities for revenue broadening HIGH LEVEL BUDGET ANALYSIS 1. Identify sectors or programs for analysis based on policy intervention rationale. 2. For each of these programs or sectors. a. Perform step 1 of the General Budget Analysis for the Sector/program budget and expenditures b. Undertake Further Performance Analysis

BUDGET ANALYSIS WORKSHEETS Budget Analysis Worksheet Guide

Work Processes Using Excel Budget Analysis Workbook Gather Data Sources (Budget Analyst) Worksheet Data Entry (Budget Analyst) Data Analysis (Excel) Chart Developme nt (Excel)

Work Processes Using Excel Budget Analysis Workbook

THE END