Operational and Financial Issues Energy and Environment Practice Workshop 6-9 October 2004, Almaty

Increased Pressure on Implementing Fees ● UNDP Implementing fees averaged 9% over the past 4 years ● GEF Council applying pressure on all GEF Implementing Agencies to reduce their implementing fees ● A proposal was tabled to reduced fees from 9% to 7.5% ● Corporate role of IAs and associated budget is also being challenged

UNDP Fee Distribution ● UNDP/GEF mandatory assessment to UNDP “Treasury” to increase from 1% to 2%. ● UNDP COs receives 1/3 of total implementing fees, about 3% on average. ● UNDP/GEF RCUs receives 1/3 of total implementing fees to provide services free of charge to COs

Country Office Cost Recovery ● In line with its mainstreaming strategy, UNDP/GEF will try to absorb increases in mandatory assessments and continue to provide 1/3 implementing fees to Cos ● However, UNDP/GEF may have to charge for UNDP/RC time, in accordance with present SURF practices. ● UNDP/GEF cannot charge implementing costs to project budgets ● Only execution services (ISS) can be charged to projects at the request of Govt based on Universal Price List.

Percentage Fee: Trust Funds and Third- Party Cost-Sharing (TFs and TPCS) Sources of Funds Fee Range Type of Project Country Office(s) Regional Bureau BDP or BCPR Central Services Global Op. Trust Funds, TPCS 5 to 7% Country (incl. TTF Country) Everything above 2% 0.67%0%0.33%1% Regional (incl. TTF Regional) 0.67% Everything above 2% 0%0.33%1% Global/Interreg (incl. TTF, GEF, MP, Cap21) 0.33%0.33% Everything above 2% 0.33%1%

Comparison of fee distribution: Cost Recovery Policy vs. UNDP-GEF practice Country Offices Regional 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% 1%Everything above 2% UNDP-GEF current practice* 3%0.33% 1%~4.33%

Enhancing Full Cost Recovery Co-financing ? How can we ensure accountability for fees?

Co-Financing GEF Definitions: Co-Financing: Resources committed by GEF or other sources which are essential for meeting GEF objectives Co-Financing: Resources committed by GEF or other sources which are essential for meeting GEF objectives Associated Financing: Resources earmarked for related activities Associated Financing: Resources earmarked for related activities Leverage Resources: Additional resources beyond the project itself that are mobilized as a result of the project Leverage Resources: Additional resources beyond the project itself that are mobilized as a result of the project

GEF Co-Financing Ratio Source: PIR FY 2003 Reports

Sources of Co-Financing Source: PIR FY 2003 Reports

Co-Financing: Potential and Issues Substantial scope for Cost-Sharing (Cash), particularly if linked to poverty (SL) and governance issues in broader UNDP interventions – Possible Barriers:  Low priority to environment  Difficult to implement cross cutting programmatic interventions

Points for Project Revisions Expenditures over total budget cannot be covered by GEF resources Substantive budget revisions must be reported to GEF Secretariat via UNDP GEF UNDP/GEF project revisions should be forwarded to UNDP/GEF RCU before signature (five day clearance on a no-objection basis) to ensure that changes in budgets among activities are reported

UNDP/GEF Project Budget Cleanup for Atlas (ERP) 1 Issues/problems identified in FIM: Incorrect data – erroneous project numbers Incorrect data – erroneous project numbers Individual project budgets not updated via revisions Individual project budgets not updated via revisions Total project budgets that have exceeded allocations Total project budgets that have exceeded allocations Cumulative budget balances as of end-2002 are inconsistent with UNDP financial records Cumulative budget balances as of end-2002 are inconsistent with UNDP financial records

UNDP/GEF Project Budget Cleanup for Atlas (ERP) 2 Type of projects involved: Country projects National (NEX) and Direct Execution (DEX) UNOPS/UN System Agency Execution NGO Execution Regional projects Regional projects National (NEX) and Direct Execution (DEX) UNOPS/UN System Agency Execution NGO Execution

UNDP/GEF Project Budget Cleanup for Atlas (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 in FIM Budget revisions update, including mandatory revisions Examine/correct budgets that have exceeded allocations Examine/rectify budget balances as of end of 2002 to be consistent with UNDP financial statement records Identify projects that are financially closed Follow-up with executing agencies, if necessary, on all the above Completion of country & regional project budget data-entry into FIM

Completion of Migration to Atlas All offices should ensure that:  Non-migrated projects are officially closed and final revision sent to GEF – by end of March  Re-phasing takes place for active projects as soon as 2003 final expenditure is available  Budgets are restructured for active projects  Inform UN executing agencies of new budget structure and reporting requirements  Ensure that OPS budgets are identical to UNDP projects in Atlas