Total Cost of the Award - New Field Suggestion

(Andie Vaughn) #1

It would be helpful to add a new field or add to the budget field regarding the total cost of the award/project (the lifetime total estimated cost). The current budget field only captures the annual activity/project budget. We have this total estimated cost of the lifetime of the award/project, but currently have no place to publish it. Is this the case for others?

A total-budget for an activity?
A total-budget for an activity?
(Dale Potter) #2

Hi Andie, forgive me if i have misunderstood the content of your suggestion, but would it not suffice to declare multiple <budget> elements for each and every year of the project?

This way, the total budget for the project would be the sum of each declared annual budget.

(Andie Vaughn) #3

Hi Dale,

Thanks for your feedback. I think our concern is that it could take years for someone to know what the upfront estimated cost of the project will be. Additionally, projects may spend different amounts each year of the project. Publishing the total estimated cost of the project up front, as well as the annual budget allocations, could be helpful.

Forgive me though if I’m not also understanding your suggestion.

(Yohanna Loucheur) #4

The Commitment type in Transaction is where the total “award” of the project should be - at least that’s how we’ve understood the guidance so far. The award is a fairly official figure, not an estimation - it’s the value of the grant agreement, for instance, or the firm allocation of a budget to a project (making this money unavailable for other purposes, unless a formal reallocation takes place). “Commitment” isn’t intuitively where one might look for the total budget, but there’s a logical link to DAC reporting.

Now, the estimated cost of a project may well be a different figure from the award, and it may be useful to publish it too. That would be in the planning phase, wouldn’t it? We don’t publish this type of data so we’ve never looked into where it would fit in the standard… It’s an interesting question.

(Andie Vaughn) #5

Thanks, Yohanna. The figure we want to report represents the total estimated cost of the project/activity over its lifetime.

We publish the annual budget in the budget field and the commitment for the reporting period, but this total estimated cost of the project/activity over its lifetime is information we have and would like to report, but it currently has no place to go. It would be interesting to see if this could fit into the standard in the future.

(Yohanna Loucheur) #6

I’m not sure I understand this part Andie. Why do you restrict the commitment value to the reporting period? The field is meant to capture the full value of the funds committed to the project, which seems similar to the total cost over its lifetime.

If in fact total commitment and total cost are not similar in your case, could you briefly explain the difference? It’s always helpful to understand how other organisations manage things.

(Bill Anderson) #7

Andie, are you saying that you have a project that doesn’t have a fixed total budget (or budget limit) over its lifetime? If so this is something that the standard doesn’t handle. I’m not convinced that it should.

I think there is a fairly common scenario, if not often admitted, that some donors have a confidential budget limit which is different from the publicly agreed commitment in order to build in a worst case scenario on performance conditionality.

(Andie Vaughn) #8

Thanks Yohanna and Bill for weighing in on this.

Yohanna - our activities can have an obligation or disbursement made against them over many quarters. When I say commitment, I mean transaction type = 2. We could commit funds against the award for many quarters (our reporting period). Our commitments and disbursements are how much we are actually obligating and disbursing in a given quarter against an activity in individual transactions. We also report the budget field which is the annual budget for that activity. At the beginning of the activity; however, when it is first awarded, there is a field that we have called the total estimated cost of the activity, which represents the estimated cost of the activity over its lifetime. Over time, This is what we would like to consider being able to publish that field up front. Does that make sense?

Bill - does that clarify for you as well what we would like to consider?

(Mark Brough) #9

I agree there is no place for this at the moment in the standard and think it would be useful. This is how I understand the issue (which I understand applies particularly to US agencies, but probably some others too):

  1. project has a total estimated cost of USD 5 million over 5 years
  • there is nowhere to publish this at the moment in the Standard
  1. agency commits to the first 2 years of the project, USD 2 million
  • this commitment is (for many organisations) a legal obligation to spend the money, and fits into the DAC definition of a commitment, as well as the IATI Standard’s definition:

    A firm, written obligation from a donor or provider to provide a specified amount of funds, under particular terms and conditions, for specific purposes, for the benefit of the recipient.

  1. agency also provides forward budgets broken down by quarters for 1 year forward
  • this can be published in the budget field and updated from year to year

My understanding is that for some donors, the total estimated cost and the commitment can vary quite considerably, not only due to conditionality but also due to budgeting processes. Being able to publish both therefore seems to provide some additional information that cannot currently be published by the standard.

A total-budget for an activity?
Tech Paper: Improvements to the Activity Standard
(Wendy Rogers) #10

I have now moved this topic into the ‘Standard Management -> Modifications, Additions, Improvements’ category so that any candidate enhancements to the IATI Standard shall be considered for the new Std upgrade.

Related discussions can also be viewed on the ‘A total budget for an activity’ topic (topic now closed)

(Herman van Loon) #11

Do we still need an additional element 'Total costs’to the activity standard when we relax the requirement that budgets need to be specified by quarter?

The total budget could be derived by summing up the individual budgets. An example of an activity with a planned start-date 1-1-2017 and a planned end date 31-12-2015. The budget is only detailed for the first two years. Thereafter a lump sum amount is known:
Budget 1-1-2017 to 31-12-2017 = 1000
Budget 1-1-2018 to 31-12-2018 = 1500
Budget 1-1-2019 to 31-12-2015 = 7500

Derived total budget (= total estimated costs by the publisher) 10.000

There are a number of advantages:
1 - the activity standard does not need to be complicated with another budget element which might be confused with the ‘commitment’ transaction.
2 - the budgets can actually reflect the real world planning practices of the publisher instead of fictive quarterly planning process which often does not exist at all in real life.

For a detailed insight in what funds will be transferred when to the receiver, the element ‘planned disbursements’ can be used.

(Bill Anderson) #12

The guidelines originally adopted by the Tech Team, based on our understanding of the DAC definition of ‘commitment’ were that:

  • The commitment (or sum of commitments) was the total ‘legal’ budget for the activity
  • The budget element should break this commitment down indicatively (annually or quarterly) over the lifetime of the activity. In other words the total is committed but the budgets are not binding in any specific period.

@markbrough then produced persuasive argument that not all publishers were legally able to report a commitment that covered the lifetime of an activity. Hence the proposal for an additional element.

A definition for such an element could be something like

The total estimated cost of an activity where this exceeds the total commitment reported. When this element is not present the total estimated cost is the sum of commitments.”

(Andie Vaughn) #13

To echo Bill and Mark,for donors like ourselves who cannot report forward looking budget information, we believe this additional field would be very useful. We would publish the initial total estimated cost which would not change, but then the commitments and disbursements against that on a quarterly basis. Without the total estimated cost of the activity published, it would be unclear to data users what to expect in terms of future commitments for that activity.

(Mark Brough) #14

@bill_anderson I think this looks good. I guess you could simplify it a little further, something like:

The total estimated cost of an activity. When this element is not present, the total estimated cost is the sum of commitments.

@Herman, I am not sure multi-year <budget> elements really help. Given that there is such a variance in fiscal years across countries, I think it would be much better to retain strong recommendations in the standard to publish a quarterly breakdown. If a breakdown by quarters has to be estimated, it makes much more sense for that to be done by the data publisher who is more likely to know their likely spend profile than other users of the data. If there is a remaining amount that is not allocated to a specific year, the total estimated cost could be used for capturing that.

(Herman van Loon) #15

@bill_anderson @markbrough I agree that the (sum of) commitment(s) is the ‘legal’ budget of the activity. It represents the financial consequences of a legally binding agreement with another party.

What is not clear to me, is how the term ‘budget’ is used. A budget is i.m.o. the organization’s internal allocation decision of funds. So a budget might (and often is) different from the total commitment amount. This is properly reflected in the definition of the budget element : “While it is useful for the sum of budgets to match the sum of commitments this is not necessarily the case, depending on a publisher’s business model and legal frameworks.”.

Also the periodicity of the budget allocation is i.m.o. organization dependent. It might be yearly but can be different as well. In the case made by @AVaughn, if I understand correctly, the budget which can be published is simply one amount covering the lifetime of the activity.

The planned disbursement element should, according to its definition, be used to publish the expected cash transfers by period (day, month, quarter, year).

So it is not clear for me why we should need yet another IATI element. The existing elements seem to be sufficient to represent the real world business practices. The assumption is that the budget elements reflects the actual internal planning processes of an organization and is not a technical construct for cash flow predictions. If your budgets do not actually predict the expected cash flows, you can use the ‘planned disbursement’ element.

(Mark Brough) #16

@Herman, I think you are right that there is an issue around language here. In the current definitions (pasted below), the budget element states that the “The purpose of this element is to provide predictability for recipient planning on an annual basis”, so implying the need for quarterly breakdown to match different fiscal years. However, planned disbursement is currently for specific transfers of cash, ideally on a specific date. I always understood that as being particularly related to budget support and cashflow.

Interestingly, in this May 2010 consultation paper (p25) on the IATI Standard, there is actually a total-cost element in there. Does anyone remember why it was taken out? [That paper also emphasises that the budget element should be according to the recipient’s fiscal year.]

Budget definition:

The value of the aid activity’s budget for each financial quarter or year over the lifetime of the activity. The total budget for an activity should be reported as a commitment in the transaction element. The purpose of this element is to provide predictability for recipient planning on an annual basis. […] While it is useful for the sum of budgets to match the sum of commitments this is not necessarily the case, depending on a publisher’s business model and legal frameworks.

Planned disbursement definition:

The planned disbursement element should only be used to report specific planned cash transfers. These should be reported for a specific date or a meaningfully predictable period. These transactions should be reported in addition to budgets - which are typically annual breakdowns of the total activity commitment.

(Emphasis added)

(Bill Anderson) #17

This has to do with our original proposal that co-funded activities should be reported by a lead organisation who would report on behalf of the other donors involved. Total cost of an activity was thus the sum of all commitments of all donors and (if applicable) matched-funding from the recipient institution.

There was widespread opposition to this proposal from a number of large donors and so we ended up with a standard in which donors only report their own money.