Support Cost Recovery in WFP COST RECOVERY POLICY
- Slides: 7
Support Cost Recovery in WFP COST RECOVERY POLICY: HLCM-UNDG CONSULTATIONS April 4, 2008
WFP Funding Background WFP 100% voluntary funded Historically: u One-third contribution in cash to ‘regular resources’ for: u All transport and associated costs for development programme, and u and ALL support costs However, by the early 1990’s: u Development resources and associated cash were declining u Increasing emergency portfolio without overhead contribution u Serious funding problem for support costs u Support cost expenditure without secure resource levels Mid 1990’s: u Interim measure: support cost levied on emergency and relief operations u The need for each programme to be fully self financing was
New Policies Implemented u New policies implemented in January 1996 u Based on Full Cost Recovery: u No more core resources / regular budget u All costs associated with the implementation of a contribution to be covered by that contribution: Food Contribution Full share of Indirect Costs Associated Costs Ext Transport LTSH ODOC, DSC Flat Indirect Support Cost Rate (ISC)
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
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)
PSA/ISC Management - Illustration 420 400 380 360 340 320 300 280 260 240 Biennial PSA Budget Excess ISC Income Shortfall ISC Income = Expenditure ISC Income 0 1 2 3 4 Operational Level in US$ Billion 5 6 7 8
Funding Policies - Illustration 1: PROJECT Contributions FULL COST RECOVERY Approved Project Budget Donation 1 Donation 2 Don. 3 1, 000 100 200 … External Transport 900 90 180 etc. Landside transport (LTSH) 500 50 … Other Direct Op. Costs (ODOC) 100 10 etc. Direct Support Costs (DSC) 500 50 Total Direct Costs 3, 000 300 [Timeframe: 6 months to 5 years] Food Indirect Support Cost (ISC) Charge – 7% 21 Total Contribution 321 2: CORPORATE [Timeframe: 2 years] Biennial PSA 3: EXTRABUDGETARY RESOURCES • Special Accounts • Trust Funds + General Fund Approved Funding (ISC) 400 +21 PSA Reserve (Equalization Account) + ….
