Operational and Financial IssuesOperational and Financial Issues

Energy and Environment Practice WorkshopEnergy and Environment Practice Workshop6-9 October 2004, Almaty6-9 October 2004, Almaty

Increased Pressure on Increased Pressure on Implementing FeesImplementing Fees

● UNDP Implementing fees averaged 9% over UNDP Implementing fees averaged 9% over the past 4 yearsthe past 4 years

● GEF Council applying pressure on all GEF GEF Council applying pressure on all GEF Implementing Agencies to reduce their Implementing Agencies to reduce their implementing fees implementing fees

● A proposal was tabled to reduced fees from A proposal was tabled to reduced fees from 9% to 7.5% 9% to 7.5%

● Corporate role of IAs and associated budget Corporate role of IAs and associated budget is also being challengedis also being challenged

UNDP Fee DistributionUNDP Fee Distribution

● UNDP/GEF mandatory assessment to UNDP/GEF mandatory assessment to UNDP “Treasury” to increase from 1% to UNDP “Treasury” to increase from 1% to 2%.2%.

● UNDP COs receives 1/3 of total UNDP COs receives 1/3 of total implementing fees, about 3% on average. implementing fees, about 3% on average.

● UNDP/GEF RCUs receives 1/3 of total UNDP/GEF RCUs receives 1/3 of total implementing fees to provide services free implementing fees to provide services free of charge to COsof charge to COs

Country Office Cost RecoveryCountry Office Cost Recovery

● In line with its mainstreaming strategy, UNDP/GEF will In line with its mainstreaming strategy, UNDP/GEF will try to absorb increases in mandatory assessments and try to absorb increases in mandatory assessments and continue to provide 1/3 implementing fees to Coscontinue to provide 1/3 implementing fees to Cos

● However, UNDP/GEF may have to charge for UNDP/RC However, UNDP/GEF may have to charge for UNDP/RC time, in accordance with present SURF practices.time, in accordance with present SURF practices.

● UNDP/GEF cannot charge implementing costs to project UNDP/GEF cannot charge implementing costs to project budgetsbudgets

● Only execution services (ISS) can be charged to projects Only execution services (ISS) can be charged to projects at the request of Govt based on Universal Price List.at the request of Govt based on Universal Price List.

Percentage Fee: Trust Funds and Third-Percentage Fee: Trust Funds and Third-Party Cost-Sharing (TFs and TPCS)Party Cost-Sharing (TFs and TPCS)

Sources Sources of of

FundsFunds

Fee Fee RangeRange

Type of Type of ProjectProject

Country Country Office(s)Office(s)

Regional Regional BureauBureau

BDP or BDP or BCPRBCPR

Central Central ServicesServices

Global Global Op.Op.

Trust Trust Funds, Funds, TPCSTPCS

5 to 7%5 to 7% Country (incl. Country (incl. TTF Country)TTF Country)

Everything Everything above 2%above 2%

0.67%0.67% 0%0% 0.33%0.33% 1%1%

Regional (incl. Regional (incl. TTF Regional)TTF Regional)

0.67%0.67% Everything Everything above 2%above 2%

0%0% 0.33%0.33% 1%1%

Global/Interreg Global/Interreg (incl. TTF, (incl. TTF, GEF, MP, GEF, MP, Cap21)Cap21)

0.33%0.33% 0.33%0.33% Everything Everything above 2%above 2%

0.33%0.33% 1%1%

Comparison of fee distribution: Cost Recovery Comparison of fee distribution: Cost Recovery

Policy vs. UNDP-GEF practicePolicy vs. UNDP-GEF practice   Country

OfficesRegional Bureau

Central Services

Global Operations

BDP or BCPR

UNDP-GEF historical practice*  

3% -- 1% -- ~5%

UNDP’s new Cost Recovery Policy for non-core, global/ interregional funding sources, such as GEF

0.33% 0.33% 0.33% 1% Everything above 2%

UNDP-GEF current practice* 

3% 0.33% 0.33% 1% ~4.33%

Enhancing Full Cost Recovery Enhancing Full Cost Recovery

Co-financing ?Co-financing ?

How can we ensure accountability for fees?How can we ensure accountability for fees?

Co-FinancingCo-Financing

GEF DefinitionsGEF Definitions::

Co-FinancingCo-Financing: Resources committed by GEF or other : Resources committed by GEF or other sources which are essential for meeting GEF sources which are essential for meeting GEF objectivesobjectives

Associated FinancingAssociated Financing: Resources earmarked for : Resources earmarked for related activitiesrelated activities

Leverage ResourcesLeverage Resources: Additional resources beyond : Additional resources beyond the project itself that are mobilized as a result of the the project itself that are mobilized as a result of the projectproject

GEF Co-Financing RatioGEF Co-Financing Ratio

GEF39%

Co-Financing61%

Source: PIR FY 2003 Reports

Sources of Co-FinancingSources of Co-Financing

UNDP (TRAC)2%

UN Agency1%

Gov't (Cash)38%

Other12%

Bilateral Donors5%

Multilateral Donors2%

Regional Banks1%

NGO's6%

Private Sector12%

Gov't (In Kind)21%

Source: PIR FY 2003 Reports

Co-Financing: Potential and IssuesCo-Financing: Potential and Issues

Substantial scope for Cost-Sharing (Cash), Substantial scope for Cost-Sharing (Cash), particularly if linked to poverty (SL) and particularly if linked to poverty (SL) and governance issues in broader UNDP governance issues in broader UNDP interventions – interventions –

Possible Barriers:Possible Barriers: Low priority to environmentLow priority to environment Difficult to implement cross cutting programmatic Difficult to implement cross cutting programmatic

interventionsinterventions

Points for Project RevisionsPoints for Project Revisions

Expenditures over Expenditures over totaltotal budget cannot be covered by budget cannot be covered by GEF resourcesGEF resources

Substantive budget revisions must be reported to GEF Substantive budget revisions must be reported to GEF Secretariat via UNDP GEFSecretariat via UNDP GEF

UNDP/GEF project revisions should be forwarded to UNDP/GEF project revisions should be forwarded to UNDP/GEF RCU before signature (five day clearance on UNDP/GEF RCU before signature (five day clearance on a no-objection basis) to ensure that changes in budgets a no-objection basis) to ensure that changes in budgets among activities are reported among activities are reported

UNDP/GEF Project Budget Cleanup for UNDP/GEF Project Budget Cleanup for Atlas (ERP) 1Atlas (ERP) 1

Issues/problems identified in FIM:Issues/problems identified in FIM:

Incorrect data – erroneous project numbersIncorrect data – erroneous project numbers

Individual project budgets not updated via revisionsIndividual project budgets not updated via revisions

Total project budgets that have exceeded allocationsTotal project budgets that have exceeded allocations

Cumulative budget balances as of end-2002 are Cumulative budget balances as of end-2002 are inconsistent with UNDP financial recordsinconsistent with UNDP financial records

UNDP/GEF Project Budget Cleanup for Atlas UNDP/GEF Project Budget Cleanup for Atlas (ERP) 2(ERP) 2

Type of projects involved:Type of projects involved:Country projectsCountry projects

National (NEX) and Direct Execution (DEX)National (NEX) and Direct Execution (DEX)

UNOPS/UN System Agency ExecutionUNOPS/UN System Agency Execution

NGO ExecutionNGO Execution Regional projectsRegional projects

National (NEX) and Direct Execution (DEX)National (NEX) and Direct Execution (DEX)

UNOPS/UN System Agency ExecutionUNOPS/UN System Agency Execution

NGO ExecutionNGO Execution

UNDP/GEF Project Budget Cleanup for UNDP/GEF Project Budget Cleanup for Atlas (ERP) 3Atlas (ERP) 3

UNDP/GEF has asked COs to take action on:UNDP/GEF has asked COs to take action on:Examine/correct erroneous project budgets recorded Examine/correct erroneous project budgets recorded in FIMin FIMBudget revisions update, including mandatory Budget revisions update, including mandatory revisionsrevisionsExamine/correct budgets that have exceeded Examine/correct budgets that have exceeded allocationsallocationsExamine/rectify budget balances as of end of 2002 to Examine/rectify budget balances as of end of 2002 to be consistent with UNDP financial statement recordsbe consistent with UNDP financial statement recordsIdentify projects that are financially closedIdentify projects that are financially closedFollow-up with executing agencies, if necessary, on Follow-up with executing agencies, if necessary, on all the aboveall the aboveCompletion of country & regional project budget data-Completion of country & regional project budget data-entry into FIMentry into FIM

Completion of Migration to AtlasCompletion of Migration to Atlas

All offices should ensure that:All offices should ensure that:

Non-migrated projects are officially closed and final Non-migrated projects are officially closed and final revision sent to GEF – by end of Marchrevision sent to GEF – by end of March

Re-phasing takes place for active projects as soon as Re-phasing takes place for active projects as soon as 2003 final expenditure is available2003 final expenditure is available

Budgets are restructured for active projectsBudgets are restructured for active projects Inform UN executing agencies of new budget Inform UN executing agencies of new budget

structure and reporting requirementsstructure and reporting requirements Ensure that OPS budgets are identical to UNDP Ensure that OPS budgets are identical to UNDP

projects in Atlasprojects in Atlas