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					ANNEX to the Emergency Application Form

BUDGET PREPARATION GUIDE FOR ACT APPEALS

WHAT IS REQUIRED The budget MUST be in the ACT format As part of the manual, ACT CO provides a diskette in which this budget format will be found.   ACT CO provides a standard budget format in EXCEL. This standard budget can be adapted by an implementing member(s) according to own need. The implementing member must provide: - The name of the organization - the period for which the budget is being prepared should be clearly stated e. g Jan 1, 2001 to December 31, 2001 The budget format provides columns for: - Description of resources needed e. g. water purifying tablets (NOT provision of water purifying tablets) - Type of Unit required e. g. boxes, months, days, pieces etc - Number of units required e. g 100 - Cost per unit e. g $10, KSH200 etc - Budget (the figure in this column is the result of the number of units multiplied by cost per unit. Example 4 X $6 = $24 where 4 stands for number of units and $6 cost per unit. ) - If local currency is the basis for budget, then an additional column for US dollar must be provided or else use the budget format in two currencies which is the other format provided by ACT CO. The USD value will be determined using exchange rate applying at that point in time or the rate determined according to the policy of the organisation. - the financial budget is presented to co-relate with the plans and presentation in the narrative Excel spreadsheets are easy to prepare Use of Excel allows one to build in the various cells formulas for functions such as multiplication, addition (Sum), conversions (one currency to another) and the calculation of variances including percentages. The use of Excel and correct formulae will ensure arithmetic accuracy. Can easily be adapted into a reporting tool If sent electronically, can be cross-checked for accuracy by the receiver. Under normal circumstances all transactions are carried out using local currencies. Therefore it is normal for the budget to be calculated at local currencies for most of the budget items (except those that would be procured abroad). This is perfectly acceptable. However, these amounts should then be converted to US dollar figures to allow for universal understanding. Columns can easily be added in Excel to calculate conversion from local currency to USD using exchange rate applying at the time

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Why is it important to prepare the budget in Excel

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The budget values MUST be in US dollar

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Line items must be divided into correct categories These must be in line with those in the narrative part of the appeal proposal

The following are some of the categories that may be identified in an ACT appeal: 1. INCOME: this is always the first section of the budget:  List the expected income that is already known / pledged  Include in-kind donations - both in the income section and exactly the same details in the expenditure section. 2. EXPENDITURE  Crisis Phase : - Assessment - Food Relief - Non Food Items including medical/ health - Nutrition - Water and sanitation - Transport, warehousing and handling costs - Personnel and administration costs related to this phase only  Post Crisis Phase: - Reconstruction and rehabilitation of housing - Food security  Transport, Storage/warehousing and handling - Hire of trucks - Warehouse rental - Drivers - Loading/offloading cost of labour  Capital Equipment - Office equipment - Office furniture - Communications equipment  Indirect Costs: (Personnel, administration and support) - Salaries and staff benefits - Staff travel - Staff allowances / Per Diems - Staff Insurance - Office rent - Telephone and fax expenses - Office utilities  Audit and Monitoring  All the costs related to an activity should be identified and budgeted for under that activity i.e. determine all resources (material and personnel) that would be needed for the planned activity to happen. Note: this includes:- Goods/materials items needed - Salaries and wages of those staff that would be directly involved e. g. water engineer and the period in which they would be involved e. g (number of months). - Transport expenses related to the activity - Travel expenses that would be incurred in carrying out the activity etc. Note: these are the expenses which would only be incurred if the activity takes place and if the activity is taken away, then all these expenses would also be taken away.  Determine the total for each category

Subtotal the budget categories

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Input formulas

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  Indicate type of unit, number of units and unit costs per line item 

Excel allows for one to insert formulas in cells. In many instances, figures are calculated elsewhere and then typed on the spreadsheet. The possibility of occurrence of errors is increased. Various formulas that can be used are for multiplication, addition (summation ()), division, calculating of percentages Formulas ensure that all of the subtotals and totals are correct and consistent throughout the report. In addition, any adjustments made to line item amounts will automatically be updated in subtotal & total amounts The ACT CO budget diskette will have formulas already inserted for the budget column, the variance column and variance in percentage column. Do not write on this diskette but keep it as a master / template. To use save the diskette as a new document. Delete all comments where they have been inserted by ACT CO. These have been inserted to guide you. Also delete the sheet not being used – two sheets have been provided, one for single currency and the other for two currencies. Where budgeting is in local currency, using the ACT CO budget format for two currencies, the column for Budget in USD would already have the formula inserted. The exchange rate would have to be typed in the relevant column – see comment which would have been inserted Where more budget lines than are provided for by ACT CO are needed, insert lines where needed and then copy the formulas from those lines that already have the formulas. Check to see if formulas are correct in the various cells

In the column “Type of unit” type in the relevant measuring indicator: - For salaries –month - Blankets – pieces - Vehicle hire – trip, load - Maize, rice etc – Metric ton - Rent , telephone - month  In the column “Number of units, type the number required Note: where more than one unit of the same item are needed it is advisable to keep the period consistent and rather double the unit cost. Example: if 2 engineers at the same salary (say $500 each per month) are needed for a period of 6 months and the type of unit used are months, then keep the number of months at 6 not 12. This will ensure consistency in the period. Note: the description should indicate clearly the number “2” engineers  In the column “Unit cost” type the amount it would cost per unit. - Costs of frequently purchased items can be made available immediately by the accountant of your organization if a database of frequently purchased items is kept. - Obtain at least three quotes for major items not frequently purchased - Buy local where items are available and at reasonable prices - Where as indicated in the example above, more than one of the unit is required, such as 2 engineers, then the cost per unit (in this case salary per month) should be doubled. Using $500 per engineer it will be $1,000 per month  Travel (# of trips and # of staff going on trip)  The budget presentation must be in the same logical sequence presented in the narrative. Note: At this stage it is very important to go back to the planned activities in the narrative to check that all resources and correct quantities needed to carry out the activities are included in the budget.  This will assist you in ensuring that no activity is under-budgeted or even not budgeted at all.

Correlation of budget to planned activities

Annex to Emerg. Appl. Form - Budget guide

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Budgeting for personnel(staff) that

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There are two categories of staff that would normally be budgeted: those directly related to the program/ activity and those providing the indirect support service and as such may be working on several or all programs of the organisation Ensure that programmatic staff are included in the relevant programs and NOT under the general heading “personnel, admin, operations and support”. These are DIRECT COSTS to the program. Example : under Food Security, 100% of the salary of an agriculturist whereas the salary of a logistician may be split among several programs depending on whether he/she is spending full time or not on ACT appeal. Check to see if sufficient personnel needed to ensure a successful implementation of an activity are budgeted for Fringe benefits may either be included in the salary or shown as a separate budget line The staff under Indirect Costs (Personnel, Admin & Support) include: - Director – a percentage determined by time spent on the ACT appeal. - Program co-ordinator – percentage determined by time spent or the full cost if all his time is spent on the ACT appeal. - Finance Manager – a percentage. The assumption is that he/ she is responsible for the finances of all the programmes of the organisation - Accountant – a percentage (same as Finance Manager) - Secretary – a percentage (same as above. Exceptions are where the secretary’s total function is around the appeal) - Driver – a percentage (same as secretary) A portion can be allocated to the appeal. For example, the office pays utilities for the entire office. Together with personnel (NOT DIRECT), office operations and communications should normally NOT EXCEED 15%

Administration and other operational costs that would be allocable to more than one project

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PLEASE READ FURTHER ABOUT THIS BELOW UNDER “SHARED COSTS”! (taken from the Budget checklist of LWR) Audit fees, monitoring and evaluation  These are separate from the administration costs  All ACT appeals for USD 50,000 and above MUST be audited. Note: It is possible to budget for translation expenses where English is not used  Budgets must be estimated as realistically as possible for the ACT appeal. Avoid over-estimating the budget in the hope that you will attract funding. Significant under /over-expenditure gives an impression of poor budgeting, which may affect future funding.  On the other hand modifications to a budget do not always result in an increase to funding  Only bank fees related to appeal funds may be expensed to this line item.   Using formulas in the budget and then referencing the budget for numbers used in the narrative will ensure that your arithmetic is correct. See end of this document for example. (taken from the Budget checklist of LWR)

Review to see if budgeted amounts are realistic, are they overly high or low?

Budget line for bank fees Check the arithmetic correctness Ensure that budget line items are adequately explained in the body of the proposal or accompanying budget notes Ensure that budget line item descriptions match the line item descriptions listed in the budget notes

This is important for clarity when looking up specifics on what a budget line covers and for comparing the budget notes with the budget.

Annex to Emerg. Appl. Form - Budget guide

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Check to see that the budget matches the proposed plan

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The budget should accurately reflect activities. Are all costs included in the budget that are needed to perform the proposed activities? Please run a spell check in your Word document and Excel spreadsheet for the budget. Errors due to wrong spelling may cause confusion and delays in issuing an appeal. At the worst, the budget line may be deleted as a result and this could have a negative impact. It is essential that the partner’s finance officer review the budget in order to assess a variety of possible impacts, including ability to track, spend and report and cost share funds as well as accuracy of budgeted amounts.

Run a spell check for the proposal and the budget

Ask the finance officer / manager to review the budget and budget notes

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SHARED COSTS ( from LWR) For shared costs, please include an allocation statement (in memo form, not in the budget notes or proposal).
Office rent, utilities, supplies, and other such costs in an office not entirely dedicated to the grant’s project must have a set basis for allocation, justifiable either by the number of staff working on the project or the square footage taken up by the project workers. The methods must be consistently used, so there needs to be a set policy for allocation of costs. Ideally such an allocation method would be direct charging any supplies purchased and working out an allocation for rent and utilities by taking the total square footage of the office and calculating which people/departments occupy what percentage of that square footage. That percentage would then be used to calculate their share of such costs. Another possible way is to just take the total number of people in the office and allocate based on number of people. As an example, if there are a total of 20 people in an office and 5 people work for this project 100% of their time, then 25% (5 divided by 20) would be the basis for allocation of shared expenses. It is preferable that supplies be direct charged whenever possible, and there should be a way to keep written track of that to ensure that only supplies used for the program are charged to it. We would need to be advised what that method of tracking is; i.e. use of requisition forms, submission of receipts, or records kept by a central person in charge of ordering supplies.

As a rule of thumb, it is fine to estimate the allocated costs on the budget, but when it comes to claiming expenditures, the costs must be based on an actual and consistent method. Communication charges will be direct charged to the grant since we receive an itemized bill and keep a phone log.

Annex to Emerg. Appl. Form - Budget guide

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SAMPLE BUDGET NARRATIVE: (from LWR) Excerpt from “OFDA Guidelines for Grant Proposals and Reporting,” issued October 1998 by USAID/OFDA: “The budget narrative provides an opportunity to substantiate the figures developed for the budget. The budget narrative should expand on information included in the detailed budget by providing information on how costs were estimated. Methodologies for estimating costs could include current actual cost experience, pro-forma invoices, etc. Expatriate Project Manager The project manager will work entirely for this project. Salary is based on the established salary scale of the organization. An engineer is needed to oversee the digging of the well and to train local residents in its maintenance and operation. Salary is based on the going rate for engineers in the local economy. The organization’s fringe benefit rate of 31% is applied to all staff listed under the salary category. The house will be occupied by the Project Manager. The monthly rent for the 1,200 sq. ft. house is based on actual cost of $600 per month. One round-trip ticket is required to transfer the Project Manager from headquarters in the U.S. to the project site and return. The price quoted is based on quotes provided by corporate travel agency. The price quoted is based on the engineering estimates developed by the project engineer. The price quoted is based on engineering estimates developed by the project engineer. The office will serve as a base of operations for all staff working entirely on this project. The monthly rental for the 400 sq. ft. office is based on actual cost at $1.25/sq. ft. The vehicle will be used by the engineer and the price quoted is based on actual cost."

National Engineer

Fringe Benefits

House Rental

International Airfare

Monolith Pump

Construction Materials

Office Rental

Vehicle Rental

ACT C.O. Geneva, August 28, 2003 / Rev. November 2004
G:\ACT\MANUAL\Manual Docs - Word 97\Budget Preparation Guide - Annex to Appl Format.doc


				
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