GREATLANDCOLLEGE

DEPARTMENTOFDEVELOPMENTSTUDI
ES
BEDELECent
er
Cour
seName:Dev
elopmentFi
nanceandResour
ce
Management
Cour
seCode:DMGT733
Cr
edi
thour
s2
Tar
getgr
oup:MAi
nDev
elopmentManagementst
udent
s
Gr
oupAssi
gnment
1,
NameMi
ti
kuWadaj
oNager
iIdno:GLC0534/
2012
2,
Mit
ikuAy
aleGal
ata I
dno:
GLC/0763/
2012

3ndsi
mst
er
Nev
,2013E.
C Beddel
e,Or
omi
a,Et
hiopi
a

1
A TheFi
nancingFramewor
kforSust
ainabl
e
Developmenti
nEmergi
ngEconomies:
TheCaseofUr
uguay

Todev
elopy
ourbudget
ingski
ll
:

In addi t
ion,t he financing programmes av ail
ablef r
om t he public sector,non-
government alor ganisati
ons ( NGOs) ,t he financialsect orand mul til
ater
alcr edi
t
agencieswer eexami ned.Ther esult
sobt ai
nedshowt hatthemainf i
nancingsour ces
forsustainabledev elopmentar elocatedwi thinthepubl i
csectorduet otheabsence
ofadev elopedfinancialmar ket,andt hattheexi sti
ngfinanci
alinstrumentsdonot
addresst heSDGswher emostat tenti
oni srequi r
ed.
Thelat t
ercircumst ancesmakei tchallengingt oachievetheseSDGsi nUruguay .The
studyf i
ndingshighl i
ghttheneedf orgr eatercoor dinati
onamongal lparti
est omake
effi
cientuseoft hescar cer esourcesav ail
abl etoanemer gi
ngeconomyandt hus
enableittomeeti t
sSDGs

I
nr el
at i
ont otheseobj ecti
ves,Uruguaypr esentedit
sf i
rstVNRi n2017,foll
owedby
anotheri n2018,ont hepr ogressmadet owar dsmeet i
ngt he2030Agendat argets.
Bothr eport
semphasi zedt heimpor t
anceofi ncludi
ngtheSDGsi nthestr
ategi
cplans
ofgov ernmentagencies, ofassociat
ingtheNat i
onalRegisterofEval
uati
onswiththe
SDGsandofst rengt
heni nginsti
tuti
onsthr oughwor kshopsf orpubli
cmanager sto
developskill
sinmoni tori
ngandev al
uati
ngpr ogresstowar dstheSDGs
Commonf uncti
onsofabudgetar e:
-

a.Recor
dingt hegoal
s/obj
ect
iveofor
gani
zati
oni
nmonet
aryt
erms& r
efl
ect
act
ivi
tyrel
atedcost
sfort
hecomingy
ear(
s).

b.Faci
li
tat
ing pl
anni
ng in organi
zat
ions by out
li
ning t
he act
ivi
ti
es t
o be
under
takenandtheresour
cestobeused.

c.Faci
l
itat
ingnegot
iat
ionwi
thdonor
s.

d.Cont
rol
l
ing,monit
ori
ngandeval
uat
ionoft
hepr
ojectbycompar
ingt
heact
ual
cost
sagainstt
hebudget
edcost
s.

Al
l
ocat
ingt
hel
i
mit
edr
esour
cet
oappr
opr
iat
egoal

Commonly,f
orthemajor
it
yofNGOs,therear
ethreeorsomet
imesf
our(
by
spl
i
tti
ngt
hefi
rstonei
ntotwo)t
ypesofbudget
.Thesear
e

I
ncomeandexpendi
tur
e/expense/budget

Capi
tal
budgetand

Cashf
lowbudget

Ar
ti
cl
erev
iewassi
gnmentPage2
 • Sour
cesofi
ncomef
orNGOSCont
ri
but
ionf
rom member
s

• Speci
algi
ft
sandl
egaci
es

• Pr
ogr
am f
ees(
forexampl
eser
viceschar
gesort
uit
ionf
ee)

• Foundat
iongr
ant
s

• Cont
ri
but
ionf
rom donor
s(r
est
ri
ctedandunr
est
ri
cted)
,andot
her
s

GatherBudgetdat af rom y ourownOr ganizati

on( NGO)andev al
uatethebudget i
ng
system
Thisanal ysisshoul dalsoconsi derdebtrepay mentschedules,whichwoul dnor mally
takepriori
tyov erinvest mentsi ntheSDGs.Anot heressenti
alaspectoft hisanalysi
s
i
st opredictthecount r
y ’
sav erageeconomi cgr owthrateupto2030, asgr owthr at
es
areaf f
ectedbyt hecomposi tionofpubl i
candpr i
vatespendingont heSDGs.I nthe
analysi
s,mor eover,i
tisassumedt hatgreaterinvestmentinthisrespectwi l
lnarrow
thegapbet weenpercapi taGDPi nthepoor estandr i
chestcountr
ies,aspr oposedin
SDG10.
Uruguayr esolvedt oincor poratetheSDGsi ntoitsgovernmentalconsiderati
onsand
i
ncluded
These obj ectives int he budgetcy cle withi
ni ts mechanisms fort he planning,
moni t
oringandev aluat i
onoft hecount r
y’seconomi cperformance.Andbudget i
ng
approachesandi dent i
fiesthest r
engt hsandweaknessesTwoappr oaches:
a.Tr adi
tional Approach&

b.Moder
nAppr
oach

a)Tr
adi
ti
onalAppr
oach

- Usesthepr
evi
ousactualbudgetdat
aasabasel ineandadjustthefi
guresf
or
cer
tai
nfact
orssuchasinfl
ati
on,pri
cechanges,changesi
nact i
vit
ylevel
sand
newdevel
opments.

- Thebestexampl
eoft
radi
ti
onal
budget
ingappr
oachi
sIncr
ement
alBudget
ing.

- I
nincrement
albudget
ing,budget
saredrawnupyear
lybysi
mpl
yappl
yi
nga
per
centagei
ncr
easetotheitemsori
ginal
l
yagr
eed.

Tr
adi
ti
onalAppr
oach-Weakness

• Thebasebudgeti
snotquer
iedf
orappr
opr
iat
enessandr
elev
ance,

• Nol
i
nkexi
stswi
tht
heov
eral
lfut
ureper
for
mances,

• I
tdoesnotencour
agef
resht
hinki
ng,

• I
tmayper
pet
uat
ethei
nef
fi
cienci
est
hathav
eal
readyexi
sted,

Ar
ti
cl
erev
iewassi
gnmentPage3
 • I
tmaybedif
ficul
ttojust
if
ythef
igur
est
odonor
sast
heor
igi
nalcal
cul
ati
on
maybel
ong-
forgot
ten.

• b)Moder
nAppr
oach

Twot
ypes:

i
. Pl
anni
ng,
progr
ammi
ng,
andBudget
ingSy
stem appr
oach(
PPBS)and

i
i
. Zer
o-basebudget
ingappr
oach.

• Pl
anni
ng,
progr
ammi
ng,
andbudget
ingsy
stem (
PPBS)appr
oach

-A str
ong li
nk i
s est
abl
i
shed bet
ween pl
ans ofthe organizat
ion,pr
ogr
ams
f
ormul
atedt
oaccompli
shpl
ans,
andther
esour
ceall
ocat
ionpatter
n.

I
tinv
olv
est
hreel
evel
sofmanagement

• Resourcemanagement:Ident
if
icat
ionofneeds,
anal
ysi
sofopt
ions,
sel
ect
ion
ofprograms,
andal
locat
ionofresources.

• Pr
ogram management:Establ
i
shmentofbasicsuppor
tsystem,i
mpr
ovement
i
nbasicbudgetst
ruct
ureandfinanci
almanagementpr
act
ices.

• Poli
cy management:Impl
ementati
on ofpol
i
cies and r
elat
ed oper
ati
ons;
account
ing,
repor
ti
ngandeval
uat
ion.

 Develop a project (t
ake one of the existi
ng ones) and pr epare an
i
ncome/ expenditur
e and cash fl
ow budgetf ort he sel
ected proj
ects/or
programsCapitalbudget(i
nvest
mentexpenditur
e)isaf i
nanci
alpl
ant hatli
sts
theexpendit
uresoft hecomi ngperi
odoncapi talpr oj
ect
sandequi pment s
thatwil
li
ngener alf
orm par
toftheNGO‘sFixedAsset s.

• I
tinv
olv
esmaj
or&non-
recur
rentexpendi
tur
essuchas:

 Vehi
cles

 Of
fi
cef
urni
tur
eandequi
pment

 Comput
ersandr
elat
edequi
pment
s

 Bui
l
dingConst
ruct
ion

 Maj
orr
enov
ati
onandi
mpr
ovementcost
s

 I
nvest
menti
nsecur
it
iesand

 Pur
chaseofi
mmov
abl
epr
oper
ti
es,
etc…

Ar
ti
cl
erev
iewassi
gnmentPage4
  Taxesont obacco
 Taxesonr enewabl e.
 Taxesonpest i
cidesand
 chemi cal f
erti
li
sers
 Pay ment sforecosy stem
 Services.
 Ecological f
iscal t
ransfer
s
 Andcar bonmar ket s
 Socialanddev elopment
 Impact
 Bonds—r esult
s-based
 Financing
 Publicguar antees
 Impacti nvestment
 Environment altrust
 Funds.
• Cashf lowbudget

Cashflow budgetisbasicall
ythef orecastofcashpay mentsandrecei
ptswhi
chis
deri
vedf r
om theincome/ expendit
ureandcapi talbudgetandhelpstomonit
orthe
fl
owoff unds/casht
hroughoutt heorganizat
ion.

ThecashflowforecastformostNGOsat t
emptst
opredi
ctt
hef
lowofcashinand
outoftheorganizat
ionthroughoutt
heyearbybr
eaki
ngdownthet
otalbudgeti
n
small
erti
meperiods,usual
lyonemonth.

Fi
nanci
alPl
anni
ng

Fi
nanci
alpl
anni sapr
ngi ocessconsi
sti
ngof
:

• Anal
yzi
ngt
hei
nvest
mentandf
inanci
ngchoi
cesopent
oanor
gani
zat
ion.

• Pr
oject
ingt
hef
utur
econsequencesofcur
rentdeci
sions.

• Deci
dingwhi
chal
ter
nat
ivest
ounder
take.

• Measur
ing subsequentper
for
mance agai
nstt
he goal
s setf
ort
hint
he
f
inanci
alpl
an.

I
tinv
olv
esbui
ldi hl
ngbot ongt
ermsf
undr
aisi
ngst
rat
egi
esandshor
tter
m budget
s
andf
orecast
.

• For
ecast
edf
inanci
alr
epor
ts/
budgeti
simpor
tantt
ool
soff
inanci
alpl
anni
ng.

• For
ecast
inginfi
nancialmanagementi
sneededwhent
heor
gani
zat
ioni
s
r
eadyt
oesti
matei
tsfut
uref
inanci
alneeds.

• For
ecast
ing uses pastdat
a as a base and t
hen pl
anned and expect
ed

Ar
ti
cl
erev
iewassi
gnmentPage5
cir
cumstances ar
e i
ncor
por
ated i
n or
der t
o est
imat
e t
he f
utur
e f
inanci
al
requi
rements.

• St
epsi
nvol
vedi
npl
anni
ng(
predi
cti
ng)Pr
ocessoff
inanci
alneeds

 Pr
oject t
he organi
zat
ion’
srev
enues and expense/
expendi
tur
e ov
er t
he
pl
anningper
iod.

 Esti
matet he l
evel
s ofinv
estmentin currentand fixed asset
sthatar
e
necessar
ytosupportt
heacti
vi
ti
esoft
heor ganizat
ion.

 Det
ermine t
he organi
zat
ion’
sfi
nanci
alneeds(
cash need)t
hroughoutt
he
pl
anni
ngperiod.

Thef
inanci
alpl
anni
ngpr
ocesscanbebr
okendowni
ntosi
xst
eps:

1.Proj
ectfi
nanci
alst
atementsandusetheseproj
ecti
onstoanaly
zet
heef
fect
sof
theoper
ati
ngplanonproj
ect
edbenefi
tsandvar
iousfi
nanci
alr
ati
os.

Thepr oj
ecti
onscanalsobeusedt omonitoroperat
ionsaftert
hepl anhasbeen
fi
nali
zed and putint
o effect
.Rapi
d awar
eness ofdeviat
ions f
rom t he pl
an is
essenti
ali
nagoodcont rolsyst
em,whi
ch,i
nturn,i
sessenti
altocorporatesuccess
i
nachangi ngworl
d.

2.Deter
minethefundsneededtosupportthefi
ve-
yearplan.Thi
sincl
udesf
undsfor
pl
antandequipmentaswel lasfori
nventori
esandr ecei
vabl
es,forR&Dpr
ograms,
andformajoradv
erti
si
ngcampaigns.

3.For ecastfundsav ail

abil
ityov erthenextf i
vey ear
s.Thisi nvolvesesti
mati
ngt he
fundst obegener atedi nternal
lyaswel last hoset obeobt ainedfrom exter
nal
sources.Anyconst raint
sonoper at
ingplansimposedbyf inancialrest
ri
cti
onsmust
beincor porat
edintot heplan;const rai
ntsincl
uder estr
ict
ionsont hedebtrati
o,the
currentrati
o,andthecov erager ati
os.

4.Establi
shandmai nt
ainasystem ofcont
rol
stogover
ntheal
l
ocati
onanduseof
funds,Bankl oan,wit
hinthefi
rm.Inessence,t
hisi
nvol
vesmaki
ngsurethatt
he
basicplaniscar
ri
edoutproper
ly.

5.Developpr oceduresforadjusti
ngthebasicpl anift
heeconomi cforecastsupon
whichthepl anwasbaseddonotmat eri
ali
ze.Forexample,i
ftheeconomyt urnsout
tobestrongert hanwasf orecasted,t
henthesenewcondi ti
onsmustber ecogni zed
andrefl
ect edinhigherproducti
onschedules,largermarket
ingquotas,andt hel ike,
andasr apidl
yaspossi ble.Thus,Step5i sr eall
ya“feedbackloop”thatt riggers
modifi
cat i
onstothef i
nancial
plan.

6.Est
abli
shaper for
mance-basedmanagementcompensati
onsyst
em.I ti
scri
ti
cal
l
y
i
mportantthatsuchasystem rewar
dsmanagersfordoingwhatstockhol
der
swant

Ar
ti
cl
erev
iewassi
gnmentPage6
t
hem t
odo—maxi
mizeshar
epr
ices.

Per
centofSal
esMet
hod

Amethodoff
orecasti
ngf
utur
efi
nanci
alst
atement
sthatexpr
esseseachaccountas
aper
cent
ageofsales.

Whenconst ruct
ingaf inanci
alf orecast
,thesal esforecastisusedtradit
ional
lyto
esti
matev ari
ousexpenses,asset s,andli
abil
it
ies.Themostwi del
yusedmet hodfor
making these project
ions ist he percent-
of-
sal es method,in whi
ch the vari
ous
expenses,asset
s, andliabil
i
tiesforaf ut
ureper i
odar eesti
matedasaper centageof
sal
es.

Theseper
cent
agescanbeconst
ant
,ort
heycanchangeov
ert
ime.

A Pr ocurementProcedure sets outthe st

eps and condi
ti
ons t
hathaveto be
fol
lowed byst af
fto acquir
egoodsand ser vi
cesso t hattheobj
ect
ivesofthe
organizat
ioncanbeful
fil
l
edef f
ici
entlyandeff
ect
ivel
y.

Theprocedurewill
:outl
inet heprocessandaut hori
ti
esforor
deri
ng,recei
vingand
payi
ngforgoodsandser v i
ces;descri
bewhi chmethodofpaymentoracquisit
ioni
s
tobeusedf ordi
ffer
entgoodsandser vi
ces–f orexampl
e,whenitisacceptablet
o
usepet
tycash( t
hisshouldberare),banktr
ansfer

Fi
nanci
ngSour
cesf
orSust
ainabl
eDev
elopment

Ther ei snosi mpl eregulatorysolutiontofinanci ngsust ainabledev el

opment .Instead,
anappr opriatecombi nat i
onofpol i
cymeasur esmustbeappl i
ed, takingi ntoaccount
l
egi slativeandr egulatoryopt i
ons, i
nsti
tuti
ons, pr ogrammesandi nstrument s.
TheI nt ergov ernment alCommi tteeofExper tsonSust ai nableDev el
opmentFi nancing
has
Suggest edanappr opriatepolicyf r
amewor k,structuredi nt ermsoff undingsour ces:
thenat ionalpubl icsect or,t
henat ionalprivatesect or,thei nternat i
onalpubl i
csect or,
the i nternat i
onalpr ivate sectorand combi ned f inanci ng.These sour ces are
transf ormedi ntoinstrument sbyi ntermediariesanddi rectinvest orswi tht hepur pose
ofachi evingeconomi c, soci
al andenv ir
onment al goal
s
The usef ulness and appl i
cabi l
it
y ofeach oft hese f i
nanci ng i nstrument s and
appr oacheswi lldependont heSDGsest ablishedf ort hecount r
yi nquest ionandon
thef i
nanci ng

FinancingInstr
umentsf orSust ai
nabl
eDev elopment
Toachi evetheSDGs,t hewor koft heinter
nationalfi
nancialcommuni t
y,t
hepr i
vate
fi
nancial
Sectorand t he publi
cf inancialsectormustbe coor dinated.Accordi
ng tot he
Organisati
onforEconomi c
Co-operati
onandDev elopment( OECD),publicandpr ivatesav i
ngs,especi
all
yi n
favourabl
e
mar ketconditi
ons,shouldbesuf fi
cienttomeett hedemandsoft hethreemai n
i
nv estmentcategori
esint hisrespect
:tosatisfythebasicneedsf ortheprogr
essof

Ar
ti
cl
erev
iewassi
gnmentPage7
soci ety;t ocr eatei nfrast ruct uref orsust ainabl edev elopment ;andt opr ovidegl obal
publ icgoods( thiscat egor yr efers, abov eal l, t
ot henecessar yr esponset ot het hreat
ofcl i
mat echange) .Gov ernment shav er el ati
velyl ittl
econt rolov eragent si nt he
privat esect or ,whol argel ydet ermi net hepaceofpr ogresst owar dsachi evingt he
SDGs.
Nev er theless,i nt hosear easwher esomei nfluencecanbeexer ted,gov ernment s
mustdosoef fect i
velyandconsi stent ly.
Accor dingt oKhar as, cer taineconomi cinst rument sfor m ani mpor tantpar toft heset
ofenv ironment alpol icyt ool sav ailabl e.These,t oget herwi thregul ationsandpubl i
c
i
nv est ment ,canhel pr educet hecost sofobt ainingenv ironment ali mpr ovement s,
alt
hough such pol icies can nev erbe cost -free.The chal lenge f oremer ging
economi es( ofwhi chUr uguayi sone)i st oi dent ifyandadopti nstrument st hat
combi neenv ironment alandeconomi cpol icies,thatpr ovidef lexi bili
ty,ar emoder ate
i
nt he use ofscar ce r esour ces,mot ivat e changes i n behav iourand gener ate
resour cesf ort hef inanci ngofenv ir
onment alinf rastructure.Suchi nstrument smay
i
ncl udef eesf oruse, char gesaccor dingt oenv ironment alimpactandpol l
utiont axes.
Theseopt ionscompl ywi thmostoft heabov econdi ti
ons,ar eespeci allysui t
abl efor
thei ntegr ationofenv i
ronment alandeconomi cpol i
ciesandcanbedesi gnedt o
adv ance sust ainable dev elopment . These i nst rument s pr omot e sust ainable
dev elopmenti nt hree way s:by mot i
v ating a behav i
our alchange t or educe
env i
r onment ali mpact s,andt herefor e,t hemagni tudeoft henecessar yi nvest ment s;
bygener ating i ncome t hatcan be used t of i
nance t hese i nv estment s;and by
foster i
ng,di rect l
y ori ndi r
ect l
y ,a r edi stribution ofsoci ety’sr esour ces t owar ds
heal thierandmor esust ai nabl eact ivities, from t heenv ir
onment al standpoi nt .
Thei nt ernat i
onalf inanci alcommuni ty,t hepr ivatef i
nanci alsect orandt hepubl i
c
fi
nanci alsect ormustal lwor ki ncl osecoor dinat i
oni ftheSDGsar etobeachi eved.
These f i
nanci alef for ts can be cl assi fied i ntot hree ty pes:concessi onalpubl i
c
fi
nanci ng( mul til
ateral or gani sations) ,publ i
cbor rowi ng.

Ar
ti
cl
erev
iewassi
gnmentPage8