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Translating costing into expenditure frameworks

Translating costing into expenditure frameworks. Case Studies – Pacific-based David Hutton. Workshop on MDG-based planning, and integration into the national planning and budgeting framework Pohnpei, FSM 26-29 June 2007. Case Studies.

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Translating costing into expenditure frameworks

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  1. Translating costing into expenditure frameworks Case Studies – Pacific-based David Hutton Workshop on MDG-based planning, and integration into the national planning and budgeting framework Pohnpei, FSM 26-29 June 2007

  2. Case Studies • Analysis of Financial Information - Facts from Figures: Primary Education Expenditure • Making forward projections of expenditure - Projecting Primary Education operating expenditure • Analysing for Budget Savings • Justification of a bid for a new project, program or activity

  3. Suggested solutions • There are definite solutions for analysis questions • But, a variety of views on how to use the data to make choices • So, the solutions may be only partial and there may be other view points • Written solutions include additional reference material or guidelines and are more extensive than would be expected

  4. 1. Analysis – Primary Education • Trend for Primary Education expenditure: Rapid growth 96-2001, doubled in 5 years, then flattened and declined. • Pupil/Teacher ratio: Reduced from 29 to 19 • Relationship to other data: Inverse relationship to teacher numbers

  5. 1. Analysis – Primary Education • Trend for School supplies and Books: Falling in dollar terms and real terms = families need to spend more • Real expenditure rising?: True, but mostly staff • Main cost driver?: Teaching staff = 92% This seems high = check benchmark data

  6. 2. Projecting Staff costs

  7. 3. Analysis for budget savings • Three largest expenditure items:Staff 79.5%Petrol & Oil 6.3%Boat Maintenance 4.9% • Three largest sub-programs:Policy formulation 22.4%Resource evaluation 19.7%Surveillance 18.5%

  8. 3. Analysis for budget savings • Where to start looking for savings? Need more data. See hints in solution. • Impact of cutting back on fuel and maintenance? Staff may not be able to work at all – false saving. So, be sensible. • How to reduce staff costs? Attrition combined with transfers and training. Redundancy = last resort.

  9. 4. Justification for a new project • Practical issues to consider Suitability, support, parts, maintenance, training, fuel, storage, ownership • Financing operational costs: Farmer co-ops need to charge for services • Measuring benefits: Private vs. Public • Identifying risks Weather, loss of work, machinery breaks, nobody pays

  10. Steps to consider a new project • Define the problem – issue, outcome, beneficiaries • Identify options – not a single solution • Seek expert advice – make sure it will work • Estimate costs - checklists • Estimate benefits – checklists, volumes/values • Compare benefits to cost ratio • Select best option – highest benefit/cost ratio or greatest benefit

  11. Project approach is very similar to a Performance-based Budget • The seven step process can be used for a: • Project • New activity • Performance-based budget • Don’t jump to the solution – We need to buy a new X • Consider options • Define benefits so can measure success = Performance-based measures

  12. Discussion

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