Attachment J.10_EnvBudgettingToolkit.pdf

f

Aligning Budgets for Implementing Environmental

Compliance Safeguards in USAID Development Food

Assistance Programs

This publication was produced for review by the United States Agency for International Development (USAID). It was prepared with support from Sun Mountain International under USAID’s Global Environmental Management Support (GEMS) project.

Aligning Budgets for Implementing Environmental Compliance Safeguards in USAID Development Food Assistance Programs: A Toolkit

May 19th, 2015

Prepared for: US Agency for International Development, Office of Food for Peace (FFP), Bureau for

Democracy, Conflict and Humanitarian Assistance (DCHA)

Compiled and edited by:

Emily Kunen, Environmental Advisor and AAAS S&T Fellow, DCHA, USAID

Erika J. Clesceri, Bureau Environmental Officer, DCHA, USAID

Prepared under:

The Global Environmental Management Support (GEMS) Project, Award Number AID-OAA-M-11-00021. The Cadmus Group, Inc., prime contractor (www.cadmusgroup.com). Sun Mountain International, principal partner (www.smtn.org).

http://www.cadmusgroup.com/ http://www.smtn.org/

DISCLAIMER

The authors’ views expressed in this publication do not necessarily reflect the view of the United States Agency for International Development or the United States Government.

Advisory. This Toolkit is advisory only. It does not constitute official USAID regulatory guidance or policy.

Following the practices and approaches outlined in the Toolkit does not necessarily ensure compliance with USAID Environmental Compliance requirements, USAID budgeting requirements, nor host country environmental requirements.

i

Acknowledgements: This Toolkit for Aligning Budgets for Implementing Environmental Compliance Safeguards in USAID Development Food Assistance Programs was developed based on comments and suggestions from extensive bilateral, in-house stakeholder consultation and expert input. The Team is very grateful for the active and insightful input from both the Finance and Program offices of the wide range of Food for Peace Implementing Partners. Special thanks go out to USAID Food for Peace staff, as well as, USAID Environmental Officers from the Middle East Bureau, Global Health Bureau, and Europe and Eurasia Bureau.

Development and Limitations: This Toolkit has been developed based on the requirements for Food for Peace programs at the time of publication. It is expected to be of use for other USAID programs, but not all content is universally applicable.

Comments and corrections: This Toolkit is a work in progress. Comments, corrections, and suggested additions are welcome. Contact: Erika Clesceri, DCHA Bureau Environmental Officer (eclesceri@usaid.gov) and Emily Kunen, DCHA Post-Crisis Environmental Advisor (ekunen@usaid.gov).

mailto:eclesceri@usaid.gov mailto:ekunen@usaid.gov ii

TABLE OF CONTENTS

1 Introduction

1.1 What is Environmental Compliance Budgeting?

1.2 When to Budget for Environmental Compliance Requirements

1.3 Who Should Use this Toolkit

1.4 Toolkit Organization

2 Developing Project Budgets for Environmental Compliance Requirements

3 Reviewing Project Budgets for Environmental Compliance Requirements

3.1 Steps for Reviewing a Budget

3.2 Reviewing Budgets Throughout the Project Cycle

Annex 1: USAID Environmental Compliance Basics

AI.I Overview: Environmental Compliance Process for FFP Projects

AI.II The IEE: A Foundational Tool for Environmental Compliance Budgeting

AI.III The EMMP: The Action Plan for the IEE

Annex II: Budgeting Basics

AII.I FFP Budget Format Overview

AII.II Detailed and Comprehensive Budgets

AII.III Budget Narratives

Annex III: Questions to Consider in Identifying Environmental Costs

Annex IV: Checklist for Reviewing Project Budgets for Environmental Compliance

Annex V: Example of Developing a Budget for Environmental Compliance Requirements: Road

Rehabilitation

Annex VI: Object Class Categories & Environmental Costs iii

Figures Figure 1. Developing Project Budgets for Environmental Compliance Requirements

Figure 2. Approach to Reviewing Budgets for Environmental Compliance Requirements

Figure 3. Integrating Environmental Compliance into FFP Life of Project

Figure 4. Partial Screen Shot of the 2014 FFP Detailed Budget

Figure 5. Categorizing Budget Elements

Tables Table 1. Illustrative EMMP Table

Table 2. Program Elements Covering Most FFP Activities

Table 3. Excerpts of an Example EMMP for Road Rehabilitation

Table 4. Materials and Services Needed to Implement Environmental Requirements

Table 5. Quantifying Environmental Costs

Table 6. Translation of Environmental Costs into Standard FFP Budget Categories

Table 7. Integration of Environmental Costs into Detailed Project Budget

Table 8. FFP Object Class Categories* & Environmental Costs

Information Boxes Box 1. Environmental Budgeting Requirements in USAID Policy

Box 3. PREP Stage Challenges ...................................................................... Error! Bookmark not defined.

Box 2. Common Materials and Services Needed for Environmental Requirements in FFP Projects

Box 4. How Much Does This All Cost?

Box 5. Design Trade-Offs: Cost Implications

Box 6. Funding Sources for FFP Programs

Box 7. Dedicated Environmental Staffing

List of Acronyms 22 CFR 216 Title 22 of the Code of Federal Regulations Section 216 CDF Community Development Funds EMMP Environmental Mitigation and Monitoring Plan FFP USAID’s Office of Food for Peace FFPMIS FFP Management Information System IEE Initial Environmental Examination ITSH Internal Transportation Shipping and Handling PERSUAP Pesticide Evaluation Report and Safer Use Action Plan PREP Annual Pipeline and Resource Estimate Proposal file:///C:/Users/PPM/Documents/Emily%20May%202015/150519%20EnvBudgettingToolkit.docx%23_Toc419817600 file:///C:/Users/PPM/Documents/Emily%20May%202015/150519%20EnvBudgettingToolkit.docx%23_Toc419817601 file:///C:/Users/PPM/Documents/Emily%20May%202015/150519%20EnvBudgettingToolkit.docx%23_Toc419817602 file:///C:/Users/PPM/Documents/Emily%20May%202015/150519%20EnvBudgettingToolkit.docx%23_Toc419817603 file:///C:/Users/PPM/Documents/Emily%20May%202015/150519%20EnvBudgettingToolkit.docx%23_Toc419817604 file:///C:/Users/PPM/Documents/Emily%20May%202015/150519%20EnvBudgettingToolkit.docx%23_Toc419817605 file:///C:/Users/PPM/Documents/Emily%20May%202015/150519%20EnvBudgettingToolkit.docx%23_Toc419817606

Section 1: Introduction

1 Introduction

Country and regional achievements in international development, generally, and food security, in particular, are dependent upon the sustainable management of essential environmental goods and services. Planning for and integrating environmental safeguards in USAID funded activities has been a long standing component of development assistance projects. Title 22 of the Code of Federal Regulations Section 216 (22 CFR 216) has regulated this since 1976 and USAID Implementing Partners have been working to ensure that their projects do no harm to the environment, communities, and people where they work ever since. In an effort towards continuous improvement in environmental protection, consultations with USAID’s Office of Food for Peace (FFP) and its Implementing Partners to identify existing barriers have revealed that access to funds to implement and manage environmental safeguards is a limiting factor. While there is enthusiasm for the work, the question inevitably arises of ‘how do we pay for this? Is there a special pot of money?’ In fact, USAID funds can pay for this, but to do so, these costs must be included in project budgets.

This toolkit serves as a resource for USAID staff and Implementing Partners throughout the iterative process of developing and refining budgets to ensure that environmental compliance requirements are identified early in project design and incorporated throughout the project cycle. Use of this toolkit is intended to guide users in identifying resources required, integrating environmental planning with project budgets, and ensuring transparency of budgets such that adequate funds remain available for environmental compliance requirements. This toolkit may be utilized for systematic development of environmental budgets as well as for facilitating the review of budgets for environmental safeguards by USAID staff.

This toolkit has been developed via expert input and extensive FFP and stakeholder consultation by FFP and the USAID Bureau for Democracy, Conflict and Humanitarian Assistance Bureau Environmental Officer through the USAID Global Environmental Management Support contract. While this toolkit has been developed with FFP funding, much of the content has relevance for other USAID offices and Implementing Partners. As such, much of the document refers to USAID broadly, but when referencing specific budgeting processes, the FFP specific situation is used.

1.1 What is Environmental Compliance Budgeting?

Environmental Compliance Budgeting is the process that ensures adequate resources are available for implementation of environmental safeguards and that provides transparency to assure the funds remain available for these activities. That is, the process by which project budgets (from the proposal stage through each annual request for funds) transparently capture costs for environmental compliance requirements, which are an integral part of any project and must be duly paid for. Budgeting for environmental compliance is required by USAID’s Operational Policies and FFP’s solicitations for development programs, as described in Box 1.

1.2 When to Budget for Environmental Compliance Requirements

Budgets are developed and refined throughout the life of a project, from the proposal through annual requests for resources. Similarly, environmental measures should be considered at each of these stages and, as such, budgeting for environmental compliance requirements should occur throughout. Initially, project activities are not as well-defined as at latter project stages; quantities, scales, locations, and other aspects of activities begin as rough estimates. At latter stages, these activities become more well-defined and initial budget estimations are systematically replaced with real values based on actual prices, salaries, and activities. This exact system applies to environmental compliance budgeting; the same uncertainties need to be considered throughout the life of the project.

Four key project cycle stages for environmental compliance budgeting are:

1. Proposal Stage: Limited details about project costs are available in the proposal budget since project design is in its earliest stages and the environmental analyses have not been conducted, but funds should be identified in budgets for best estimated environmental costs.

2. Initial Environmental Examination (IEE) Stage: The IEE is a critical tool in environmental planning and will help refine environmental compliance budget estimates from the proposal stage. As of the FFP FY2014 project cycle, the IEE is initiated by the Implementing Partner upon receipt of the Issues Letter, and submitted to USAID, after award, in time for the initial M&E workshop.

Box 1. Environmental Budgeting Requirements in USAID Policy

Budgeting for environmental compliance is not just good practice, but also is incorporated into USAID policy and FFP project requirements. USAID’s Operational Policy for Environmental Procedures (known as ADS 204) requires that “adequate resources” be allocated “for effective monitoring and mitigation to ensure compliance with 22 CFR 216 throughout the life of an activity.” ADS 204 also requires that “appropriate mitigative measures are incorporated into the design and budget for the program or activity.”

FFP solicitations also specifically reference the need for environmental budgeting. FFP’s FY2014 Request for Applications contains the following language:

“FFP requires that all projects have the necessary budget to achieve environmental compliance… As with budgeting for any project costs, a degree of budget planning must logically occur at both the initial proposal development stage and the project IEE developed later… Environmental budgeting items that were not integrated into the initial proposal’s budget, which are identified during the subsequent development of the project IEE, must be added prior to the signing of the final award.”

With respect to the actual budget included in the FY 2014 RFA states*:

“Applicants should consider salaries and fringe benefits, travel and transport, program supplies, other direct costs, etc. that are apparent at the time of project design and necessary for achievement of environmental safeguards and compliance… The budget narrative should explain how environmental safeguard costs are incorporated into line items of the detailed and comprehensive budgets.”

*Although citing FY14 solicitations, this process applies to all solicitations going forward.

3. Subcontract Development Stage: As subcontracts are developed, such as for fumigation service providers or for third party monitoring contractors, corresponding environmental compliance needs must be addressed within subcontract budgets.

4. Annual Pipeline and Resource Estimate Proposal (PREP) Stage: As additional funds are requested, and as costs associated with environmental management become clearer, budgets must ensure that funds needed to implement environmental safeguards are included.

Additionally, there are on-going opportunities to create and revise budgets as needs arise, such as during annual review processes. As such, it is important to think about budgeting for environmental compliance requirements on an on-going basis and to alert planning teams that unanticipated needs to review the budget may occur.

1.3 Who Should Use this Toolkit

This environmental compliance budgeting toolkit is designed to be of use to both USAID staff and Implementing Partners. Further, within USAID and Implementing Partner organizations, this toolkit is targeted at staff involved in 1) project budget development and review, as well as, 2) project technical design and implementation. As with any other component of a USAID project, strong coordination among staff is critical for effective environmental compliance budgeting. This toolkit is recommended to be used to facilitate communication between budget and project design staff to improve the transparency of budgeting. This process also helps refine the environmental compliance plan, known as an Environmental Mitigation and Monitoring Plan (EMMP), by advancing dialogue between key project actors which inherently results in deeper consideration for the efficiency and effectiveness of environmental mitigation measures.

1.4 Toolkit Organization

This toolkit is organized into the following sections:

Section 2: Developing Budgets for Environmental Compliance Requirements draws upon the processes for environmental compliance (see Annex I) and budgeting (see Annex II) to describe the process of developing a project budget for environmental compliance requirements.

Section 3: Reviewing Budgets for Environmental Compliance describes key considerations in reviewing a project budget for environmental compliance requirements.

Annex I: USAID Environmental Compliance Basics provides an overview of the environmental compliance process and key environmental analyses in FFP for staff not familiar with this process.

Annex II: Budgeting Basics provides an overview of the FFP budgeting process. This section is designed for staff on the project implementation or environmental compliance side who may or may not be familiar with budgeting basics, but are not familiar with the FFP budgeting process.

Annex III: Questions to Consider in Identifying Environmental Costs provides a list of questions to use in reviewing environmental compliance documents to identify materials and services needed. The questions are intended to help identify major costs, but are not on their own sufficient for identifying all costs.

Annex IV: Checklist for Reviewing Project Budgets for Environmental Compliance provides a simple checklist to use in the process of reviewing environmental aspects of budgets.

Annex V: Example of Developing a Budget for Environmental Compliance Requirements: Road Rehabilitation illustrates development of an environmental compliance budget for a hypothetical road rehabilitation activity, producing a FFP-formatted budget for the associated environmental costs.

Annex VI: Object Class Categories and Environmental Costs lists the Object Class Categories, which is one of the ways that budget items are categorized in project budgets along with examples of environmental compliance costs that would fall into each category.

Section 2: Developing Project Budgets for Environmental Compliance Requirements

2 Developing Project Budgets for

Environmental Compliance Requirements

This Section explains the process of integrating the cost of environmental safeguards and compliance into a project’s budget in four steps as part of the budget development process. Although shown as the four steps, illustrated in Figure 1, there are multiple ways to develop a budget that covers the cost of environmental compliance. What is critical is that the process is transparent to ensure that adequate funds are budgeted and remain available over the life of the project for implementation and monitoring of the required environmental compliance measures. The principles of budgeting for environmental compliance requirements can be incorporated into sustainability plans such that environmental costs continue to be budgeted for following the end of USAID project funding.

Figure 1. Developing Project Budgets for Environmental Compliance

Requirements

*Note: It may be possible to combine Steps 3 and 4 into a single step, depending on the particular budgeting process. It is shown here as two separate steps for greatest clarity.

Budgeting for environmental compliance requirements integrates the findings of the project level IEE1 with the project budget2 in a process that ensures adequate funding for environmental compliance requirements. This process will be iterative and involve close coordination between technical and budget staff. This process has the added benefit of refining the EMMP by advancing dialogue between key project actors, adding cost-realism to the EMMP. The steps listed here are widely applicable and would need to be adapted to organization- and project-specific systems and processes. Annex V provides an illustrative example of utilizing the four steps of this process for a road rehabilitation activity to highlight the intricacies of its application to particular mitigation measures.

1 See Annex I for more information on the USAID environmental compliance process and key documents.

2 See Annex II for more information on project budgets.

1. Identify materials and services needed to implement environmental requirements.

2. Quantify environmental costs identified in

Step 1.

3. Translate environment al costs of Step 2 into standard FFP budget categories.*

4. Integrate environment al costs into project budgets and narratives.

Step 1: Identify materials and services needed to implement environmental requirements.

Getting Started: Depending on the stage of the project, a budget developer will need to start with either the current draft of the EMMP or, if an EMMP has not yet been developed, the Environmental Safeguards Plan. With these documents, the budget developer will identify aspects of the environmental compliance requirements with an associated cost. For example, a mitigation measure may be to train staff on environmental compliance requirements annually. Associated costs may include: staff time to develop, run, and participate in the training; transportation and per diem for attendees; rental costs for the training space; printing materials; etc. Common materials and services needed for environmental compliance requirements are shown in Box 2.

Additionally, Annex III provides a list of questions that can help identify environmental costs. For example, will the project involve warehouse fumigation? If yes, budget for development of a Fumigation Management Plan and proper fumigation equipment.3 Error! Reference source not ound. discusses environmental compliance budgeting challenges that arise particularly at the PREP stage of a FFP project.

3 A Fumigation Management Plan is a specific requirement resulting from USAID’s Programmatic Environmental

Assessment for Phosphine Fumigation of Stored Agricultural Commodity, which is available from:

http://www.usaidgems.org/fumigationpea.htm.

Box 2.3. Common Materials and Services

Needed for Environmental

Requirements in FFP Projects

Staffing for implementing environmental safeguards, conducting trainings and community outreach, conducting environmental monitoring visits, etc. (See Box 7 for further discussion on staffing).

Fumigation services.

Environmental assessments for roads, irrigation, etc.

Community environmental training, such as on fuel-efficient cooking practices.

Mitigation and monitoring measures, such as water quality testing.

Travel and transport for environmental monitoring.

Equipment needed to meet environmental requirements.

Box 3.2. PREP Stage Challenges

The Annual Pipeline and Resource Estimate Proposal (PREP) budget poses a specific challenge for environmental compliance budgeting. Often, by the time the first PREP is prepared for a FFP project, those who developed the initial environmental compliance budget may no longer be involved in the project.

While budgeting for environmental compliance requirements may be included in the Proposal or IEE budget stages, these costs may not be apparent to those working on the PREP. Consequently, these resources could be assigned elsewhere at the PREP stage. This point underscores the importance of having clear, well documented, environmental compliance budgeting at early stages and having clear communication between staff implementing environmental safeguards and staff preparing budgets.

http://www.usaidgems.org/fumigationpea.htm

Refine: While the IEE, EMMP, and other environmental compliance documents are important for environmental budgeting, looking at individual mitigation activities alone will not give the complete picture. There are overarching costs to consider as well. These overarching costs include, but are not limited to, environmental compliance management, development of project-specific field tools for environmental monitoring, reporting on implementation and monitoring results, staff trainings, complying with national laws (including obtaining permits), adaptive management, etc.

Additionally, one should consult the current year’s Request For Applications IEE, existing Programmatic Environmental Assessments, and any conditions identified in the project IEE or annual Environmental Status Reports that may not be captured in the EMMP.

Environmental Costs Need Not be Stand Alone: Identifying environmental costs can be challenging due to natural overlap with costs from other individual sectors (e.g., water, agriculture, roads). For example, a field visit for the purpose of conducting an agricultural training may also involve environmental monitoring. In this case, the associated costs for transportation and staffing could be considered partially environmental but not entirely. There is no one right method for how to identify environmental costs as distinct from other costs.

Rather, the importance of this exercise is that the materials and services necessary to meet environmental compliance requirements are identified in a transparent manner to assure that adequate budget is available.

Step 2: Quantify environmental costs identified in Step 1.

Once the materials and services necessary to meet environmental compliance requirements are identified (Step 1), one must quantify these costs. There is no simple rule for how much environmental safeguards and compliance should cost, as discussed in Box 4, but what is important is that a logical process be used to determine a best estimate based on information available. All environmental costs must be allocable, allowable, reasonable,4 accurate, and consistent, but, quantitative

4 Definitions for the cost principles of allocable, allowable, and reasonable can be found in 2 CFR 230:

http://www.whitehouse.gov/sites/default/files/omb/fedreg/2005/083105_a122.pdf.

Box 4. How Much Does This All Cost?

Isn’t there a standard percentage of the total budget I can apply for all this work?? Yes and no…

There is no one flat rate that can be applied to all FFP programs because of differences in activities, locations, staffing, etc. However, years of experience have shown that there certainly is a need for some percentage of the budget to be allocated and disaggregated for specific activities.

Over time, it may be possible to get data from Implementing Partners practicing environmental budgeting to identify best practices and associated costs to provide budget percentages for different project types. However, that data does not currently exist. As an Implementing Partner, you can help, by providing USAID with this data from your projects.

http://www.whitehouse.gov/sites/default/files/omb/fedreg/2005/083105_a122.pdf guidance on what values meet those criteria are not possible with a great degree of certainty across projects globally.

Quantifying Environmental Costs is Iterative: Early in the project, there will be many assumptions and estimates. Cost estimates will later be refined as activities are defined and prices become known with greater precision. The cost of a mitigation activity may help inform project design decisions as projects make trade-off decisions between costs and design options, which is further discussed in Box 5. The costs will depend on local prices, frequency and scale of activities, staffing requirements for implementation and monitoring, etc. Note that the EMMP does not typically identify issues of scale, which is important for quantifying each cost.

Successfully completing Step 2 will require input from a wide range of staff, including field staff, staff across project activity areas, staff with knowledge of environmental compliance, and staff with knowledge of project budgets. Aspects of the project design and environmental requirements may be adjusted throughout these conversations as part of the iterative environmental compliance budgeting process.

Throughout the project cycle and successive iterations of the environmental compliance budgeting process, budget developers will want to ask the following questions:

Do the environmental resource requirements and timing remain accurate relative to implementation timelines and actual interventions?

Do the estimated costs of resources remain accurate?

Have there been changes to the IEE or EMMP that have cost implications and necessitate changes for the upcoming and future fiscal years’ funding?

Variation Between Annual Budget Sheets: Environmental costs must be quantified on an annual basis. Completing Step 2 requires some knowledge of in which years a particular activity will occur. For example, monitoring costs may occur regularly across all years of a project and therefore assigned the same annual cost. Conversely, completing an Environmental Assessment

Box 5. Design Trade-Offs: Cost Implications

A single project will face many trade-off decisions between cost and environmental impact, which will continue to arise throughout the project and may be hard to predict. A common concern over tradeoffs can be illustrated by the question of whether it is preferential to build 80 kilometers of road in a more environmentally sustainable, but more costly manner OR 100 kilometers of road at reduced cost but with more negative environmental impacts?

There is no one right answer to this question. The answer depends on project-specific factors, keeping in mind that the basic regulatory requirement is to prevent adverse impacts that are unacceptable and that can be reasonably prevented or mitigated or that can outweigh the expected positive impacts.

Cost is not the bottom line in this decision process and it is well understood that higher quality and improved environmental impacts may have budget implications. However, to explain the higher costs, these tradeoff decisions must be made clear through the budget and budget narratives so that the decision making process is transparent, the budgets are consistent with the tradeoff decisions, and there are adequate funds available to implement the improved design.

takes a few months so the entirety of the cost for this activity may only be budgeted within a single year.

Step 3: Translate environmental costs of Step 2 into standard FFP budget categories.

Each of the costs identified in Step 1 and quantified in Step 2 must now be classified5 by Object Class Category,6 line item (either as its own line item or integrated into another), Program Element, and funding source. It is possible to combine Step 3 with Step 4 and go directly from quantifying environmental costs to integrating those costs into project budgets and narratives.

For clarity though, these steps are presented separately.

Information from this step will inform the FFP formatted budget and should be captured in the budget narrative and environmental safeguard plan in the proposal.

Step 4: Integrate environmental costs into project budgets and narratives.

The environmental costs defined in Steps 1-3 are now integrated into the various program elements and line items of the final budgets to be submitted to USAID. In some cases, environmental costs may be inserted as stand-alone line items, where as in other cases environmental costs will become part of integrated line items in the detailed and comprehensive budget tables.7

For transparency, these costs must be clearly explained in the Budget Narrative. It is particularly important that environmental costs that appear as integrated line items are explained in the Budget Narrative.

5 See Annex II for an explanation of FFP budget template organization.

6 See Annex V for a list of Object Class Categories with examples of environmental costs.

7 A stand-alone line item for an environmental cost is a line in the detailed budget solely dedicated to that environmental cost. For example, a dedicated environmental compliance specialist will be listed as a single line item under the Object Class Category of Salaries, Sub-Awards, or Sub-Contracts, depending on how that person will be hired. Conversely, and integrated line item for an environmental cost is a line in the detailed budget that an environmental cost is a part of, but does not make up the entirety of the line item. For example, an engineer might be hired to work 50% time on engineering oversight and 50% time on environmental compliance. The line item for this staff person would be listed as the engineer’s position, half of which is an environmental cost.

Section 3: Reviewing Project Budgets for Environmental Compliance Requirements

3 Reviewing Project Budgets for Environmental

Compliance Requirements

This section is designed to assist in the review of a project budget for sufficient treatment of the environmental compliance requirements. Reviewing a project budget for environmental compliance requirements is a similar process to that of reviewing project budgets in any other area and draws on the steps for budget development outlined in Section 2. A budget reviewer must gather information about planned environmental compliance requirements and determine whether the costs of those requirements are sufficiently reflected in the Budget Narrative and Detailed Budget.

3.1 Steps for Reviewing a Budget

Although there are many approaches to reviewing a budget, one approach is presented in the steps illustrated in Figure 2. The review process will be iterative with the budget development process; as gaps are identified in the review, budgets may be revised.

Figure 2. Approach to Reviewing Budgets for Environmental Compliance

Requirements

Annex IV provides a checklist with guidance notes for conducting a budget review for environmental compliance requirements that captures these steps. To make the review most effective, it is advisable for the budget reviewer to consult with someone familiar with the environmental compliance requirements. A summary of the steps for reviewing a budget is included here:

Step 1: Cross check the Budget Narrative with environmental compliance documents.

The Budget Narrative should clearly explain the environmental costs that are included in the budget and how those costs are integrated. To determine whether the appropriate environmental costs are in fact included, one should cross check the key environmental compliance documents: the Environmental Safeguards Plan in the proposal stage, the IEE and EMMP following the Monitoring & Evaluation Workshop, and additionally the Environmental Status Report at the PREP stage. Particular costs to look

1. Cross check the Budget Narrative with environmental compliance documents.

2. Compare the Detailed Budget with the Budget Narrative.

3. Compare budget with prior year budget, if available.

Section 3: Reviewing Project Budgets for Environmental Compliance Requirements for in this Step are additional assessments, staffing, field visits, and equipment and supplies. Annex III provides guidance questions that can assist with this step.

Step 2: Compare the Detailed Budget with the Budget Narrative.

Step 2 consists of verifying that the environmental costs described in the Budget Narrative are in the Detailed Budget and that those costs are allocable, allowable, reasonable,8 accurate, and consistent.

Beyond the presence of the cost in a line item, the reviewer should consider the amount of the funding and its distribution over the life of the project.

Step 3: Compare budget with prior year budget, if available.

Typically, the budget for the first year of a project will require greater effort to review than in subsequent years. After the first year, the following budgets can be reviewed largely through a comparison with the prior year’s budget. Significant changes should be explained in the Budget Narrative and correspond to the Environmental Status Report’s description of environmental compliance activities for the previous year and/or changes planned for the following year.

3.2 Reviewing Budgets Throughout the Project Cycle

Proposal Stage: At the proposal stage, there is limited information about environmental compliance costs available as there is no IEE and the project work plan has not been fully developed, but environmental compliance needs are a component of the overall award budget. At this stage, a reviewer should consult the proposal’s Environmental Safeguards Plan and cross-reference risks and needs identified in the Plan with the ability of the Proposal Budget to address the risks. The budget should include plans for further environmental analyses, plans for environmental management and staffing, and other budget implications.

First Year Budget Following M&E Workshop: Reviewing project budgets in the first year will necessitate greater review than in subsequent years because gathering information about planned environmental compliance occurs for the first time. Reviewers should consult the project’s IEE and EMMP to check that planned actions to mitigate and monitor environmental risks are sufficiently addressed. There should be consistency between the EMMP, the Detailed Budget (including subcontractor budgets), and the Budget Narrative.

PREP Budgets: In subsequent years, budget reviews can focus on changes between budget requests for the coming year and the previous years’ budgets. Changes in the budget for environmental compliance requirements should be reflected in the budget narrative and explained in the Environmental Status Report. Similarly, any changes in environmental compliance requirements that are described in the Environmental Status Report should appear in the Budget Narrative and Detailed Budget. Any changes should be well justified.

8 Definitions for the cost principles of allocable, allowable, and reasonable can be found in 2 CFR 230:

http://www.whitehouse.gov/sites/default/files/omb/fedreg/2005/083105_a122.pdf.

http://www.whitehouse.gov/sites/default/files/omb/fedreg/2005/083105_a122.pdf

Annex I: Basics of USAID Environmental Compliance

Annex 1: USAID Environmental Compliance

Basics

Title 22 of the Code of Federal Regulations, Part 216 (22 CFR 216)9, requires food assistance programs, as with other USAID supported development programs, to “ensure that the environmental consequences of [USAID] financed activities are identified and considered…and that appropriate environmental safeguards are adopted...” This regulation requires that all projects evaluate proposed activities to identify and assess potential impacts, as well as develop measures to prevent, mitigate or compensate for them, as appropriate. For more information on the USAID environmental compliance process, please refer to: http://www.usaidgems.org/lop.htm.

At the heart of the compliance process is the concept of Environmentally Sound Design, which consists of addressing environmental issues throughout the life of a project, from project design through close out. It requires identifying environmental risks and mitigating potential adverse environmental impacts.

In this context, “environment” does not refer just to biophysical systems, such as the condition of wildlife habitats, but also to the environmental health of communities and individuals, such as the exposure to air and waterborne toxins. Mitigating potential adverse environmental impacts can be achieved through prevention, control, compensation, or remediation of the impacts.

The environmental compliance process and the budgeting process should be well integrated. This Annex describes the environmental compliance process for FFP projects with emphasis on two of the key documents as relevant for environmental compliance budgeting.

AI.I Overview: Environmental Compliance Process for FFP Projects

A critical aspect for the success of identifying and mitigating potential adverse environmental impacts is the integration of the facets of the compliance process into the multiple stages of a typical project life cycle, i.e., from project design, through implementation and close out. Figure 3 describes environmental compliance activities throughout the life of a FFP project.

9 22 CFR 216 is available in full from: http://www.usaid.gov/our_work/environment/compliance/reg216.pdf.

http://www.usaidgems.org/lop.htm http://www.usaid.gov/our_work/environment/compliance/reg216.pdf

Figure 3. Integrating Environmental Compliance into FFP Life of Project

The Project-IEE (here after referred to as IEE) and EMMP are explained in more detail in the following sections because of their significance as tools for environmental compliance budgeting.

AI.II The IEE: A Foundational Tool for Environmental Compliance

Budgeting

The IEE is an environmental review required of all USAID projects in which environmental risks associated with project activities in particular project locations are assessed to determine levels of risk of negative environmental impacts. Findings of the IEE result in “conditions” that a project must meet in order to mitigate risks. The IEE may also determine that additional assessments are needed, such as:

•FFP prepares a Request For Applications-Level IEE and Programmatic Environmental Assessments covering activities with high environmental risk, but not specific to a project or location. These analyses establish conditions for FFP projects that may have budgetting implications. Example: the Programmatic Environmental Assessment for Phosphine Fumigation of Stored Agricultural Commodity establishes requirements for personal protective equipment, gas monitoring, and tarping in warehouse fumigation.

•Applicants submit Environmental Safeguards Plans as part of proposals, describing how environmental safeguards & management will be integrated into project design & budgets.

Pre-Proposal & Proposal Stage

•Applicants who receive an Issues Letter from USAID develop a Project-IEE with an accompanying EMMP before the Monitoring and Evaluation Workshop.

•The IEE may determine that additional assessments will be needed which will have budget implications.

Issues Letter Stage

•Implementing Partners implement environmental mitigation and monitoring measures as described in the EMMP.

•Short of an IEE amendment, Implementing Partners may change EMMP measures to better fit the on-the-ground reality, which may have budget implications.

Implementation Stage

•Implementing Partners submit annual Environmental Status Reports with the PREP summarizing the implementation of environmental safeguards over the past year and changes for the coming year. Budget needs for the environmental management in the coming year are requested in the PREP.

•Throughout project lifecycle, adaptations to project design may lead to an IEE amendment, which may have budget implications in the PREP.

Annual PREP Stage (and Amendments)

● Pesticide Evaluation Report and Safer Use Action Plan (PERSUAP): An amendment to the IEE for all projects that involve pesticides.10

● Environmental Assessments: More in-depth environmental reviews required for specific aspects of an overall intervention. Common activities in FFP programs requiring Environmental Assessments include road construction, large-scale irrigation, work in protected areas, etc.

The IEE also determines the types of risks and how to mitigate them, which will inform decisions about proper management and monitoring structures for a particular project.

AI.III The EMMP: The Action Plan for the IEE

As part of the IEE, Implementing Partners develop EMMPs, which serve as the “action plan” for addressing the IEE findings. A typical EMMP consists of a table that lists, per activity, potential impacts, mitigation measures, monitoring indicators, methods of verification, and monitoring frequency.11 EMMPs may also include a column for mitigation measure costs. An example EMMP is shown in Table 1.

Table 1. Illustrative EMMP Table

Activity Potential Impact

Mitigation Measure

Monitoring Indicator12

Method of Verification

Monitoring Frequency

Landscaping, Planting Shrubs and Trees

Spread of invasive species

Select non-invasive, culturally acceptable species

Type of species used

Site photos, Visual inspection, Field reports

Once during planting

Potable Water Supply Improvements

Unsafe quality of drinking water (e.g., E.coli, Arsenic)

Follow water quality assurance plans & treat water

Water quality test results

Water quality tests, Field reports

Before water consumption and annually

The EMMP informs environmental compliance budgeting by identifying mitigation activities that will have an associated cost. Beyond the IEE, the EMMP should reflect the conditions established in any further environmental assessments, the Environmental Safeguards Plan from the proposal, and any Environmental Status Reports that have been submitted.

10 More information on PERSUAPs is available from:

http://www.usaidgems.org/Documents/complianceTopics/ST_Pesticides_Safer_UseCompliance_Cairo_10Oct2012.

pdf.

11 More information on EMMPs is available from:

http://www.usaidgems.org/Workshops/MalawiMay2013Materials/Chapters/STEMMP.pdf.

12 There is inherent confusion between the terminology ‘indicator’ as used in standard USAID environmental compliance and in monitoring and evaluation systems. In official USAID policy, an indicator “measures a particular characteristic or dimension of strategy, program, project, or activity level results … Performance indicators are the basis for observing progress and measuring actual results compared to expected results.” The term Monitoring Indicator in the EMMP could be more accurately described as a Mitigation Implementation Indicator, specific to the mitigation measure and reflecting whether the mitigation measure is implemented and effective. Further information on the relationship between environmental monitoring and monitoring and evaluation at USAID is available from: http://www.fantaproject.org/sites/default/files/resources/Environmental%20Considerations.pdf and additional guidance is forthcoming.

http://www.usaidgems.org/Documents/complianceTopics/ST_Pesticides_Safer_UseCompliance_Cairo_10Oct2012.pdf http://www.usaidgems.org/Documents/complianceTopics/ST_Pesticides_Safer_UseCompliance_Cairo_10Oct2012.pdf http://www.usaidgems.org/Workshops/MalawiMay2013Materials/Chapters/STEMMP.pdf http://www.fantaproject.org/sites/default/files/resources/Environmental%20Considerations.pdf

Annex II: Budgeting Basics

Each Implementing Partners has its own process for developing and adjusting budgets. This section describes the standard budgeting components for FFP projects, recognizing that there are many ways to produce these components. For additional information on USAID budgeting across the agency, please refer to the training at: http://www.usaidallnet.gov/partner-learning/4/.

AII.I FFP Budget Format Overview

Similar to other USAID project budgeting processes, FFP budgets are comprised of three main sections:

1. Detailed Budget tables for each year of the project

2. Comprehensive Budget table

3. Budget Narrative

In order to have consistency within budget formats for FFP projects, USAID developed a suggested budget format. A template for this format is available online with Detailed Budget sheets for each year of the project and an additional sheet that automatically aggregates the Detailed Budget into a Comprehensive Budget overview sheet. For complete understanding of the information presented in this section, it is recommended that the reader opens this template to review in parallel to reading. A partial screenshot of a Detailed Budget sheet from this template is shown in Figure 4.

Figure 4. Partial Screen Shot of the 2014 FFP Detailed Budget http://www.usaidallnet.gov/partner-learning/4/ http://www.usaid.gov/documents/1866/fy-2014-rfa-budget-template#overlay-context=

Source: FY 2014 Request for Applications Budget Template. A complete version can be downloaded from:

http://www.usaid.gov/documents/1866/fy-2014-rfa-budget-template#overlay-context=.

Implementing Partners produce an accompanying Budget Narrative to describe the budget.

Implementing Partners are also required to submit summary data from these sheets in the form of an Executive Summary Table, though this summary table is less relevant for environmental compliance budgeting and will not be discussed. FFP has an online portal, the FFP Management Information System

(FFPMIS) where the budgets are uploaded.

As with any multi-year budgeting process, each section of the budget is first prepared during in the initial proposal and then further refined through discussions between the Implementing Partner and FFP. Annually, budgets are prepared for the coming year as part of the PREP process. For more information on PREPs, please refer to the training at the following link:

http://www.fsnnetwork.org/sites/default/files/ffpmis_prep_training_201304.pdf.

The Detailed and Comprehensive Budgets and Narrative are further explained in the following sections, as relevant for environmental budgeting.

AII.II Detailed and Comprehensive Budgets

This section will describe the Detailed Budget format, which is developed for each year of a project and aggregated into a single Comprehensive Budget. The FFP Detailed Budget sheets are organized by type of expense (or “Object Class Categories”13, such as Salaries, Travel and Transport, and Program Supplies), which are further divided into sub-categories. Annex VI provides more detailed information on Object Class Categories and how each relates to environmental costs. Each row within an Object Class Category is known as a “Line Item.”

Each budget line item is then further categorized by type of project activity, known as “Program Element.”14 The Program Elements covering most FFP activities are shown in Table 2.

Table 2. Program Elements Covering Most FFP Activities

1. Agricultural Sector Capacity 8. Maternal and Child Health

2. Assistance and Recovery 9. Natural Resources and Biodiversity

3. Basic Education 10. Nutrition

4. Capacity Building, Preparedness, and Planning 11. Protection and Solutions

5. Civil Participation 12. Social Assistance

6. Family Planning and Reproductive Health 13. Strengthen Microenterprise Productivity

7. HIV/AIDs 14. Water Supply and Sanitation

13 Object Class Categories are more generally known throughout USAID as “Class Categories.”

14 The Program Elements listed in Table 2 are a subset of Program Elements established by the U.S. Department of State’s Office of Foreign Assistance. Projects may wish to draw on additional Program Elements from this list which can be found within the Standardized Program Structures and Definitions, available from:

http://www.state.gov/f/c24132.htm http://www.usaid.gov/documents/1866/fy-2014-rfa-budget-template%23overlay-context= http://www.fsnnetwork.org/document/food-peace-management-information-system-ffpmis-resources http://www.fsnnetwork.org/document/food-peace-management-information-system-ffpmis-resources http://www.fsnnetwork.org/sites/default/files/ffpmis_prep_training_201304.pdf

The line items are then sub-categorized by the FFP funding sources (or type of cash) in columns. Box 6 lists the funding sources that may be included, the most common being Section 202(e) Funds, ITSH funds, CDF, and Cost Share.

For example, under the Object Class Category of Salaries, there may be a line item for the Chief of Party. The total dollar value for this salary could be divided across each of the Program Elements, such as Agricultural Sector Capacity and HIV/AIDS, and then further identified as being funded by Section 202(e) funding. This process of categorizing each element of a budget (such as the individual salaries, office rent, road construction equipment, etc), is summarized in Figure 5.

Figure 5. Categorizing Budget Elements

Object Class Category

•What type of expense? e.g.:

•Salaries

•Travel & Transport

•Program Supplies

Line Item

•Give me more details? e.g.:

•Individual Expatriate Salaries

•Water Quality…