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									                                                Annex 3

                            WFP/NGO1 cooperation arrangements
                     Guidelines for preparation of NGO budgets in support of WFP

           The World Food Programme (WFP)’s cooperation with its NGO partners dates
back to the very origins of the Programme, and there are a number of references to such
collaborative arrangements in the WFP Programme Design Manual (PDM). Specific
Memoranda of Understanding (MOUs), signed at the headquarters level with several
important organizations in the NGO community, regulate collaboration in areas of mutual
interest and describe potential common ground for joint humanitarian programmes. However,
individual accords at the country level with WFP’s cooperating partners2 are based on the
Field-Level Agreement (FLA) or ‘template’, a document issued under OD Directive
OD2002/008 on 25 November 2002. The FLA defines the scope of support services expected
to be provided by the NGOs. Parallel to the FLA, Guidelines to help staff on both sides
prepare WFP partners’ support budgets were issued subsequently, and are an integral part
of the FLA.

The present document constitutes a revised version of the Guidelines. Like the previous text,
it is the result of a review conducted in close cooperation with some representative members
of the NGO community and WFP staff, both field and HQ. Although intended to facilitate
cooperation with NGOs, the document can also be used to help draw up budgets of
Government agencies, local community and local NGOs, when they perform services in
support of WFP. However, in case of such use, the financial obligations towards WFP,
and those of WFP towards the Government and local structures, may be, and often are,
different from those relating to NGOs. Care must therefore be taken to examine the
responsibilities of the Government and the other partners, as defined in the Basic Agreement,
Letters of Understanding and similar documents, to ensure that the Programme does not
undertake a burden that is not part of its normal mandate. The guidelines apply equally to
relief, recovery and development interventions, but also here, the cost reimbursement, if
any, by WFP, may vary depending on the nature of its partner’s programme, and specific
accords on cost-sharing.

    1. Statement of principle

          The principle underlying collaboration with the NGO community is one of
cooperation and complementarity within a common goal of tackling the scourges of hunger
and malnutrition which afflict a large part of the world’s population. The World Food
Programme highly values partnership, additional expertise, commitment to humanitarian
values, and the advocacy role of NGOs. Interaction with NGOs is therefore indispensable to
WFP’s own mission, which is primarily concerned with combating hunger and deprivation.
Associating other organizations in assessment of needs, targeting beneficiary groups, food
distribution, delivery and monitoring (and similar tasks), is therefore a logical step. These
duties are also often beyond the capacity of governments to handle, or are outside their
control. When such support is requested, the NGO costs relating to the services provided

  NGOs and private voluntary organizations (PVOs) are considered to be synonymous for the purpose of these
guidelines and the acronym NGO is used here throughout the document to facilitate understanding.
    Governments are normally the cooperating partners for WFP food aid operations; relative cooperative
arrangements are defined in separate documents such as Letters of Understanding.

                                                       Annex 3

in support of WFP can be reclaimed from the Programme. There are also occasions when
NGOs seek WFP’s collaboration in carrying out their own assistance programmes. In such
and other situations where joint cooperation in programme delivery is envisaged, costs are
shared or undertaken by each organisation separately. Nothing in these guidelines should
be interpreted as undermining existing relationships of trust and burden-sharing. As WFP and
the NGO community are both funded by voluntary contributions (the former principally by
governments), they both acknowledge the obligations of accountability and transparency
involved in undertaking humanitarian operations. If both WFP and the NGO receive funds
from the same donor, or from several donors but for the same purpose, overlaps and the extent
of eventual cost burden, or resource sharing, must be identified. These should be recorded in
discussions of the NGO support budget.

       2. Costs and funding base

        WFP’s project, or relief intervention, budgets are based on estimates of the cost of
individual and specific food aid operations. Such estimates will necessarily imply a good
deal of uncertainty, but it is these estimates that determine what may eventually become
available to the Programme to carry out the proposed action. Even allowing for the
‘unknowns’, these estimates must be accurate, within the limits of the known circumstances of
the situation. If an NGO is to be associated, at WFP request, in a WFP intervention, be it
relief, recovery or development, at cost to WFP, the obligation to forecast project costs
accurately applies equally to its own estimates. The most effective way to ensure such
accuracy is to engage the prospective NGO partner(s) fully in the budget preparation process.
Joint planning with NGOs should therefore include both budget and relief intervention
modalities. When costs are estimated jointly, during an assessment mission, donors are
reassured with regard to funding requirements. This may in turn lead to a better response to an
appeal. Regular joint programme reviews, including budget reviews, should be mandatory.
Participation of an NGO in initial assessment, prior to a decision on a cooperating
relationship, is desirable, but should be at cost to the NGO.

It is understood that each operation implies costs that are fixed over time, such as staff, office
rent, furniture and equipment, as well as variable costs that are related to the volume of
work to be performed. The variable costs will also include staff, fuel, communications etc.,
which will increase or decrease with the size and extent of interventions. NGOs plan their
engagements (in general and on behalf of WFP) on the basis of the projected duration of their
intervention, relatively independently of the tonnage of food to be distributed. WFP, on the
other hand, while also planning within a projected time-frame, has to develop its budget on
the basis of pledges in kind (food). Its cash availability is calculated as a percentage of the
food cost, and this has to cover all expenditures related to the operation, including costs of the
NGO intervention. The potential reimbursement to NGOs will therefore be calculated on
an estimate of the time-bound (or fixed) costs plus an estimate of costs calculated on
tonnage that is intended to be distributed (variable). WFP country offices will subsequently
divide the aggregate thus obtained by the tonnage expected to be handled, to arrive at a $/ton
NGO cost of the operation. Annex 2 (time-bound) and 2 (tonnage-based) are attached to help
identify cost items. The Annexes will be completed jointly by WFP and the NGO (or NGOs)
designated to participate in the operation, but subsequent allocation to WFP budget categories
(LTSH and ODOC) will be done by WFP country offices.3

The choice of an NGO partner is strictly the responsibility of the country office.
Although cost is the key factor in taking a decision, and cost-effectiveness is an important part
of the planning process, it is the service, capacity and reliability that have to be the main

    Separate instructions on allocation to budget categories are attached as an Annex to the FLA.

                                            Annex 3

criteria. As indicated in the FLA, compliance with the SPHERE Humanitarian Charter
(website: and minimum standards and/or the Code of Conduct for the
International Red Cross and Red Crescent Movement and NGOs in Disaster Relief, may be
used as a basis to help choose an operational partner.

    3. Budget Preparation

    a) Parallel and complementary programmes

As indicated in section 1, relief operations often comprise activities carried out by NGO
partners independently of, but parallel to, food aid distributions. Such complementarity is
welcome, and it implies a cost-sharing formula between the organizations. A formal
acknowledgement of the NGO activity and role is always necessary, together with agreement
on eventual cost-sharing, and/or recognition of the NGO contribution to a parallel or
associated support programme (e.g. in nutrition, health, sanitation, etc.). In such a case
(including situations where an NGO makes its own in-kind contribution to the food relief
operation), the specific role of the NGO should be described and complementarity/mutual
support highlighted in the WFP proposal for an emergency intervention, PRRO, or
development project document.

    b) Support operations for WFP programmes

In case of NGO support being requested and mutually agreed upon, and in line with the
principle of combining the time-bound and tonnage-based budget estimates, WFP will
claim adequate funding from donors, on the basis of a single US $ per ton formula. In doing
so, it must ensure that the resultant figure does not translate into unacceptable (for donors) US
$ per ton request. Consequently, although WFP does not impose rates, either for wages, rent
or other services, it will compare costs with local standards to ensure conformity with similar
operations and situations in the country. This does not imply that costs will not vary, as
between different partners, ranges of services, physical environments and responsibilities.
Once an itemized budget is agreed, WFP will allocate the costs among such budget categories
as are defined in its manuals, i.e. LTSH, ODOC, DSC or ISC.

    c) Budget revisions due to delays in arrivals, suspensions or programme

If there are delays in the arrival of food, interruptions in the pipeline, or if distributions
are extended beyond the originally planned period, WFP will immediately share notice of
such delays with the NGO, and the NGO will submit a revised budget that will reflect
changes, including any additional costs, due to the delay. Such requests for continued funding
during the period of interruption, extension in time, and eventual cost increments, will be
submitted to WFP as budget revisions (using the same budget schedule forms). The costs are
likely to include staff, rent and maintenance as well as other inevitable and committed
expenditure and equipment.

The World Food Programme will make every effort to examine and respond to all justified
requests, but it is recognized that its own capacity to fund operations is directly linked to
resource allocation to a specific intervention. It is also acknowledged that overruns in a
budget may need additional negotiation, and possibly recourse to stand-by and reserve
accounts, if available. NGOs will, on their part, exercise sound judgment to keep costs down
and will cooperate with WFP in phasing down, or closing, the operation, if need be. If WFP
decides to terminate the programme for reasons cited above, a normal notice, in writing, will

                                           Annex 3

be given to the NGO, and the contract may be terminated one month after receipt of such
notice. Bearing in mind the short duration of some of the contracts, no effort will be spared by
WFP to come to a mutually satisfactory solution in case such drastic action needs to be taken.

    4. Reimbursable costs

    a. General considerations

    In principle, costs as agreed with the country office are reimbursable under the
FLA with an NGO. Specifically:

All costs related to physical transport and distribution of WFP food aid to beneficiaries,
qualify for such reimbursement. Annex 2 serves as a basis for identification of potential
costs. The distinction between Sections A and B of Annex 2 1 relate to the nature of costs
over time as distinct from costs dependent on volume of aid handled (see point 3 b) above). A
detailed description of costs is provided under point 4 b) xi) below, and a brief summary
defining the principle on which they are based is given below:

   i. Staff engaged in planning, administration, delivery and monitoring of food distribution;
  ii. Office rental, be it in a central location or in the field, security and insurance, office
      supplies, communications and associated costs, directly related to the support function
      in WFP programmes;
iii. Office furniture, equipment and communications materials purchased, or in use for the
      purpose of supporting WFP operations, including costs for transportation, handling and
      eventual return of such equipment/assets to original sites;
 iv. Costs related to physical distribution and storage of WFP food, including labour, rental
      and maintenance of warehouses (this includes fumigation, fire protection or other
      related expenses and equipment such as scoops, weighing scales, containers for
      distribution, bags/receptacles for reconditioning;
  v. Purchase or hire, and maintenance, insurance and fuel for vehicles used to transport
      food commodities and monitor food distributions;
 vi. Costs associated with building up the capacity of local NGOs, when directly related to
      the WFP operation in question, to plan, manage and monitor food distributions,
      including training for that purpose;
vii. Costs of training, capacity-building, monitoring and reporting related to the
      implementation of WFP’s gender policy as described in the Enhanced Commitments to
      Women (ECW), the Executive Director’s Directive ED2003/006 – Revised Standards
      of Conduct in the International Civil Service, and the Secretary-General’s Bulletin –
      Special Measures for Protection from Sexual Exploitation and Sexual Abuse.

        b) Explanatory notes on reimbursable costs

    i. Forward planning

It is essential that agreement on the scope of NGO involvement be agreed with the country
office (see point 2 above) before implementation of the programme. It follows therefore that
WFP country offices start discussions with their potential cooperating partner(s) at the
preparation stage of the project/relief operation/PRRO. In other words, responsibility for
each step in the food aid delivery chain should be defined well ahead of the signature of the
FLA. In normal circumstances, if distribution is to be handled by an NGO, WFP will deliver
its food to a warehouse (or several warehouses) in the beneficiary country, requiring the NGO
partner to assume responsibility for the commodities upon removal from such storage.
Storage at the point of handover to the NGO, store maintenance, fumigation and general
management of the facility will be WFP’s responsibility. Distribution to the beneficiaries,

                                            Annex 3

including monitoring and reporting on such distributions, will be part of the NGO mandate.
There are, and will be, exceptional circumstances when WFP may request the NGO to
manage the primary storage location(s) and assume the related costs. There will also be cases
where the Programme will establish secondary delivery points and will rely on NGOs to
undertake responsibility for ‘secondary transport’ to such locations and for management of
secondary storage on behalf of WFP. These costs will naturally be recoverable from the
Programme, and should be included in the schedules.

    ii. Start-up costs and advance of funds

Cooperating partners will sometimes set up operations in new territory, or will substantially
strengthen existing capacity to tackle a crisis. They will therefore have to incur expenses prior
to commencing distribution of WFP food. In such a case, they will be entitled to an advance
to cover the estimated costs of setting up such operations. The costs will comprise office
rental, staff complement, maintenance, furniture and equipment including communications.
The amount of the advance is established at three months’ of the overall estimated costs of
the NGO’s intervention, unless the duration of such intervention is less than six months, when
a figure of 30 % will apply. An advance will normally be limited to US $ 100,000 unless an
agreement on a higher figure is negotiated with the CO. It can only be paid upon confirmation
of funding, either by donors or from an advance facility, but when such confirmation is
received, it will be paid promptly, within 21 days, as stipulated in the FLA (the same
conditions as for payment of invoices will apply – see below, item iii)). A schedule for
reimbursement of the advance will be established between the country office and the NGO.

   iii. Payment of invoices

WFP will normally reimburse costs on presentation of invoices or a statement of
account, within 21 days, as stipulated in the FLA. Exceptional delays in settlement, and other
serious complaints about operational issues, and upon failure to get satisfaction from the WFP
Country Director, will lead to the NGO lodging a complaint with the WFP Regional Director
in the first instance. If such recourse gives no result, an intervention with the WFP
Ombudsman will follow. It is hoped that this procedure will avoid any dispute being
publicized with the press or donors, to the detriment of the relief operation. In case there is a
query (to be presented in writing) on the invoice (or certified statement of account)
submitted, WFP will pay 75% of the value of the invoice, within the 21-day period, pending
clarification of the situation. Any subsequent invoice will, in principle, be settled once the
issues relating to the previous, partly paid account have been settled, or if there is agreement
on the follow-up of the contentious or unclear issue.

   iv. Phase-down costs

It is important that phase-down - especially complete closure - be planned and costs
estimated, at the stage of preparing the initial intervention. If that is not possible, then
such costs must be estimated prior to the completion date of the initial agreement. This will
not prevent the NGOs’ continuing beyond such closure date, if they so wish, at their expense,
and in full knowledge of WFP’s limited financial obligations. Any extension by WFP of the
operation will require preparation and approval of an additional budget.

    v. Unforeseeable costs

Changing circumstances may require amendments in the budget, be it as a result of late
arrival of commodities, increase or decrease in the number of beneficiaries, adjustments in
delivery modalities implying cost increases (or decreases), delays and consequent need for
extension in time of the intervention. It is imperative that in such cases, the WFP country

                                                      Annex 3

office and the NGO study the implications jointly, review the cooperating partner’s budget
and determine action that needs to be taken.

      vi. Pipeline breaks

It is clear that in the event of a pipeline break, NGOs will normally maintain their staff and
infrastructure in place in the expectation of resumption of food deliveries. NGO costs
relating to such interruptions in the programme, and those resulting from a consequent
extension of the duration of the intervention, will, in principle, be covered by WFP.
However, the monthly fixed costs, in the event of a pipeline break or temporary suspension,
will be limited to two months’ costs, unless notice of termination of services, due to
premature closure of WFP operations, is given in time (as per the FLA - section 8.2), or when
specific arrangements on the budget are agreed upon during the period of such a pipeline
break. Partial delivery of contracted quantities of food, with no expectation of resumption,
will amount to a situation where notice of termination will follow. Such partial delivery, when
there is some expectation of subsequent continuation of programme activities, will only be
defined as a pipeline break, and close contact between WFP and the NGO will be required to
ensure that an informed decision on continuation of the cooperation agreement can be taken.

      vii. Capital costs

WFP accepts to reimburse the costs of purchasing equipment including vehicles,4 when
used exclusively for purposes of food distribution and related services, and when such
purchase is agreed beforehand with the WFP CO. However, it is expected that partner NGOs
will exercise sound judgement in management of their operations, and will, in case
equipment, furniture, storage units, vehicles, etc. are purchased used, or are old stock, provide
evidence of costs as well as estimates of depreciation rates for the purposes of establishing
reimbursement values. WFP country offices may also consider providing NGOs with vehicles
and equipment, if available, at no cost. For its own budgeting, WFP will use depreciation
rates based on its own rules and regulations, and as far as material entrusted to the NGO is
concerned, will either recover the items at the end of the operation, or charge the NGO with a
mutually agreed residual value, or will proceed with a write-off in conformity with its
standard procedures. For those NGOs that have provisions for the application of standard
depreciation rates in their regulations, WFP will normally accept the NGO provisions; for
others the rates will be mutually negotiated. Depreciation will depend on the situation in the
country concerned and conditions of work. For instance, a vehicle operating in areas with no,
or poor, roads and heavy rainfall, will have a shorter life span than one in the capital where
asphalt roads exist.

     viii. Submission of receipts

Due to the time-consuming process of collecting payment vouchers and receipts, WFP agrees
to accept a certified statement of expenses incurred, in a format to be agreed, and on
condition that all original receipts and supporting vouchers are kept for a period of five years,
and made available on request, including for audit purposes.

      ix. Nature of services and costs associated with food interventions

While costs related to physical distribution of food aid are relatively simple to identify, there
may be some hesitation regarding other services and activities which NGOs often perform
and expect to recover from WFP. Invariably, the initial assessments of relief interventions,
and planning of recovery and development programmes, are both conducted by inter-
agency teams, with each bearing its own costs. However, the subsequent project and

    Some donors do not accept to fund the purchase of vehicles.

                                           Annex 3

emergency preparation work, once the partners are identified, would be treated differently
on the grounds that it involves an assessment of the scope of the task to be carried out by the
designated cooperating partner, and preparation of a plan on how it is to be carried out. Some
of these costs could therefore form an integral part of the intervention strategy, and
therefore can be included in the proposed budget. These costs can be:

       Staff (including volunteers) costs, comprising salaries, contributions and allowances
        for targeting, registration, distribution, monitoring of food distributions and of
        programme performance, and vulnerability mapping;
       Travel and per diem costs. Travel costs include airfares, other fares related to the
        implementation of the programme and local transportation. Per diem costs include
        daily subsistence allowances for staff;
       Other staff costs, including rest and recuperation travel, and costs that may be agreed
        with the country office;
       Office expenses, including rental, utilities, office supplies, maintenance,
        communications (terrestrial, satellite, mobile) and office vehicle running costs (fuel,
        repairs and maintenance);
       Equipment, including vehicles, communications equipment and materials, storage
        items (pallets, fumigation and other items/processes connected with the proper care
        for WFP food commodities). The purchase of vehicles would require a justification of
        the need to buy them new or second-hand;
       Project preparation, planning and appraisal, jointly with WFP, ahead of relief
       Tools, utensils, seeds and other inputs as part of a relief operation, in agreement with
        the WFP country office;
       Monitoring and evaluation of the impact of relief operations (as opposed to
        monitoring of food distributions)
       Training of local staff or beneficiary groups;
       Rain milling costs, fortification of foods, and associated costs such as rebagging after
        fortification; and
       Other costs not easily falling under any of the above categories, but which can be
        identified as strongly related to WFP food relief interventions, e.g., workshops and
        meetings, security structures as dictated by the situation, insurance (including third
        party liability), etc.

    x. Budget narrative

It is important that a budget “narrative” be submitted with the budget formats (Annexes),
describing the proposed NGO intervention modalities, and providing details of staff and
resources that would be deployed, and justification for the estimates. The narrative should
also inform on other, complementary activities that the NGO proposes to implement and their
relation to WFP food aid. It should also advise on costs that will be borne by the NGO, in
pursuance of such activities. Ideally, such a narrative should be discussed beforehand with
WFP CO to ensure that all information WFP needs to justify its own budget submission and
approval is included. Naturally, if the parallel NGO programme is not linked to food aid, there
will be no need to disclose costs to WFP.

   xi. Transparency and advocacy

WFP’s ability to resource, and thus cover its own as well as the NGO’s costs, largely
depends on transparent presentation of expected costs. This openness must extend to
NGOs’ own contribution to the relief programme, which is often not inconsiderable, and
which may help influence donors, who invariably call for solidarity and cooperation between
humanitarian agencies. The specific NGO contribution to a joint programme must therefore

                                            Annex 3

be highlighted, as much as WFP’s own contribution in presenting the proposals to WFP HQ
for donor pledging. WFP country offices and the NGOs are encouraged to discuss and agree
on modes of cooperating and on what can be shared in terms of services and costs. In a case
where an NGO is able to make a contribution to a joint WFP-NGO programme, such
contribution should cover reimbursable costs set forth in section 4 of the Guidelines (see also
point 3 a)

    xii)    Management service charge

A standard management service charge of 5 % to cover NGO headquarters
administrative costs is included in the schedules. This charge is related to the general
administration of the NGO activities, and requires no supporting evidence. In exceptional
cases, where an NGO manages a WFP support programme out of its HQ, a direct support cost
budget may include a proportion of HQ costs for WFP consideration as part of the normal
scheduled cost within a reimbursement agreement. If there is an NGO parallel programme in
operation, or a cooperative agreement is negotiated, with financial support from NGO
sources, there normally would not be any management service charge payable to the NGO.

    xiii)   Accountability

A standard reporting format is being elaborated (attachment to FLA) and will be used in NGO
reporting on their operations as they relate to WFP. Audit standards will be maintained by
NGOs as is their practice, but in case WFP auditors, internal or external, wish to audit NGO
support activities to WFP, all facilities will be provided to allow such inspection to take place.

    xiv)    Communications

Partnership requires a clear understanding of problems and a need for a mechanism to arrive
at their quick resolution. A reliable communication network is therefore indispensable. It is
thus mandatory for WFP and its NGO colleagues, who collaborate in a common programme,
to have regular, preferably fortnightly, but at the most, monthly, meetings. These would
provide a forum to discuss operational and other issues that may arise in managing a
cooperative programme relating to food assistance.


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