Project Planning and Budgeting Quiz
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Questions and Answers

When should the budget be developed?

after the identification of the activities

Why is it important to develop a project budget?

  • To estimate the total cost of a project
  • To justify the needed resources
  • To monitor and guide the project
  • All of the above (correct)

    • A project budget has no effect on the project implementer's financial viability.

    False

    Budgets are usually prepared after the activities are _____.

    <p>scheduled</p> Signup and view all the answers

    Match the budget formulation types with their descriptions:

    <p>Activity Based Budget = Disaggregating all activities generating direct costs Cost Category Budget = Disaggregating all project costs by cost categories</p> Signup and view all the answers

    What are administrative costs related to?

    <p>overall management of the project</p> Signup and view all the answers

    What is contingency in the context of project budgeting?

    <p>a planned provision for unforeseen project events or circumstances</p> Signup and view all the answers

    Which of the following are considered equipment and supplies?

    <p>Machinery</p> Signup and view all the answers

    Supplies are used up quickly, whereas equipment is considered more permanent and longer lasting, such as ________.

    <p>machinery</p> Signup and view all the answers

    What percentage of direct costs do administrative costs normally not exceed?

    <p>7%</p> Signup and view all the answers

    Contingency is a planned provision for an unforeseen project event or circumstance that normally exceeds 10% of the direct costs of the project.

    <p>False</p> Signup and view all the answers

    What is an example of a non-eligible cost in a project budget?

    <p>Debts and provisions for losses or debts</p> Signup and view all the answers

    _________ is a widely used project cost estimator with plenty of project estimate templates.

    <p>Microsoft Excel</p> Signup and view all the answers

    Match the following budget categories with their descriptions:

    <p>Human Resources = This includes project staff, short-term experts, etc. Travel = This includes national and international travel costs. Equipment and Supplies = This includes equipment A and supply X. Local Office = This includes vehicle costs, etc. Other costs = This includes cost X, etc.</p> Signup and view all the answers

    What is an example of a contingency provision?

    <p>Cost of internalizing a training originally contributed by a project stakeholder</p> Signup and view all the answers

    Currency exchange losses are eligible costs in a project budget.

    <p>False</p> Signup and view all the answers

    What is an example of administrative costs?

    <p>HQ staff technically backstopping project staff based abroad</p> Signup and view all the answers

    Contingency provision normally does not exceed _______% of the direct costs of the project.

    <p>5</p> Signup and view all the answers

    What is an example of equipment?

    <p>Equipment A</p> Signup and view all the answers

    Study Notes

    Project Budget

    • A project budget is a tool used to estimate the total cost of a project and includes a detailed estimate of all costs likely to be incurred before project completion.

    When to Develop a Budget

    • If a project is funded by an external donor, a draft budget is developed after identifying activities to ensure the total cost does not exceed the maximum budget available.

    Project Budget Cycle

    • The project budget cycle involves resources planning, budget estimating, cost budgeting, budget control, and budget adjustments.

    Project Budget Adjustments

    • Budgets are prepared after activities are scheduled, and adjustments are made to reflect project planning.

    Why Develop a Project Budget

    • A project budget must be developed to: • Obtain and justify resources • Plan for allocating organizational resources to project activities • Tie the project to its final outcome through its Results Chain • Act as a tool for top management to monitor and guide the project

    Benefits of a Project Budget

    • A project budget: • Secures project funding • Provides a basis for project cost control • Affects the project implementer's financial viability

    Budget Formulation Rules

    • There is no standard budget typology, and each funding agency has its own requirements for procedures, budgets, and cost categories.
    • A realistic and cost-effective budget should be provided.

    Preliminary Rules for Budget Formulation (2)

    • All costs should be included and detailed, whether financed by funding agencies or contributed in kind.
    • Avoid using sub-activities for budget formulation as it complicates the process.

    Project Budget Formulation (1)

    • A budget can be presented in two ways: • Not detailed, with costs disaggregated by intermediate outcome or cost category • Detailed, with costs disaggregated by output or category and subcategory, and by year

    Project Budget Formulation (2)

    • Budgets can be formulated in different ways, including: • Activity-based budget, where costs are calculated by disaggregating all activities generating each Results Chain output • Cost category budget, where costs are calculated by disaggregating all project costs by cost categories proposed by the funding agency

    Results Chain

    • The Results Chain includes: • Final outcome • Intermediate outcomes • Outputs • Activities • Cross-cutting activities

    Activity-Based Budget

    • Direct costs are those required to produce all Results Chain outputs.
    • Indirect costs are those required to produce non-specific outputs listed in the Results Chain.

    Activity-Based Budget Formulation

    • Direct costs are categorized by activity, output, and cost category.
    • Operating costs and cross-cutting costs are added to direct costs to calculate the total budget.

    Operating Costs

    • Operating costs are resources that are cross-cutting and functional to manage the whole project.
    • Cross-cutting costs are those that cannot be assigned to any single activity.

    Direct Costs

    • Direct costs are calculated by subtracting operating costs, contingency, and administrative costs from the total budget.

    Cost Category Budget

    • Cost categories are proposed by the funding agency, such as human resources, travel, equipment, and supplies.

    Cost Category Budget Formulation

    • Costs are categorized by activity, output, and cost category.
    • Operating costs and cross-cutting costs are added to cost categories to calculate the total budget.

    Cost Category Budget Total Cost

    • The total budget is calculated by adding all cost categories, operating costs, contingency, and administrative costs.

    Activity-Based Budget Categories

    • Direct cost categories may vary depending on the funding agency and may include: • Human resources • Equipment and supplies • Infrastructure • Other costs

    Activity-Based Budget Operating Costs

    • Operating costs may vary depending on the funding agency and may include: • Project staff • Project management office • Support equipment • Other costs

    Calculating Budget

    • Calculating budget involves: • Disaggregating costs into key categories • Calculating the total cost of each activity • Grouping costs by output and intermediate outcome

    Activity-Based Budget Final Format

    • The final budget format includes: • Intervention logic • Budget • Unit cost • Total cost • Sources of finance### Calculating Budget using Cost Category Approach

    • The cost category approach includes cross-cutting activities, contingency, and administrative costs.

    • The approach can be used with Excel software or alternative cost estimator software.

    Cost Category Budget: Final Format

    • The final format includes intervention logic, budget, unit, unit rate, and cost.
    • The cost categories are:
      • Human Resources
      • Travel
      • Equipment and Supplies
      • Local Office
      • Other costs
      • Contingency
      • Administrative costs

    Administrative Costs and Contingency

    • Administrative costs are related to the overall management of the project and do not exceed 7% of the direct costs.
    • Examples of administrative costs include HQ staff technically backstopping project staff based abroad.
    • Contingency is a planned provision for unforeseen project events or circumstances and does not exceed 5% of the direct costs.
    • Examples of contingency costs include internalizing a training that was originally a contribution from a project stakeholder.

    Budget: Non-eligible Costs

    • Non-eligible costs include:
      • Debts and provisions for losses or debts
      • Interest owed
      • Items already financed in another framework
      • Purchases of land
      • Currency exchange losses
      • Taxes
      • Credits to third parties

    Cost Estimator Software

    • There are several cost estimator software options, including:
      • Microsoft Excel
      • Google Sheets
      • Price&Cost
      • BrainLeaf
      • Eastimate
      • Simplestimate
      • Web Development Project Estimator
      • CMAP Software

    Project Budget: Preliminary Rules

    • The applicant should provide a realistic and cost-effective budget.
    • All costs should be included and detailed, whether financed by funding agencies or representing a contribution in kind or a valorization of stakeholders.

    Project Budget: Formulation

    • The budget can be presented in two ways: not detailed or detailed.
    • A not detailed budget is disaggregated by intermediate outcome or cost category and might be included in the project proposal.
    • A detailed budget is disaggregated by output or categories and subcategories, and by year, and must be annexed to the project proposal.

    Project Budget: Formulation (2)

    • Budgets can be formulated in different ways, including:
      • Activity-based budget: calculates costs by disaggregating all activities generating each Results Chain Output.
      • Cost category budget: disaggregates costs by category and subcategory.

    Activity-Based Budget: Formulation

    • Direct costs are calculated by disaggregating all activities generating each Results Chain Output.
    • Operating costs include cross-cutting costs and contingency costs.
    • Administrative costs are not included in the direct costs of the project.

    Activity-Based Budget: Total Cost

    • The total budget includes direct costs, operating costs, contingency costs, and administrative costs.

    Cost Category Budget: Total Cost

    • The total budget includes category costs, contingency costs, and administrative costs.

    Activity-Based Budget: Categories

    • Direct cost categories may vary depending on the funding agency and include:
      • Human Resources: costs of all human resources required to implement a particular activity.
      • Infrastructures: costs of building or renovating physical structures.
      • Equipment and Supplies: costs of equipment and supplies needed for the project.
      • Other costs: costs that cannot be included in the other categories.

    Activity-Based Budget: Categories (2)

    • Additional categories could be proposed, such as:
      • Travel: costs of travel related to the project.
      • Services: costs of human resources and technical assistance.
      • Works: costs of infrastructures.

    Activity-Based Budget: Operating Cost

    • Operating costs include:
      • Project staff: costs of staff working in all project areas.
      • Project management office: costs of fixed and variable costs of the location and equipment.
      • Support equipment: costs of equipment and supplies needed for operating the project.

    Activity-Based Budget: Operating Cost (2)

    • Operating costs may include:
      • Travel: costs of national and international travel.
      • Equipment and Supplies: costs of equipment and supplies.
      • Local Office: costs of local office and equipment.
      • Other costs: costs that cannot be included in the other categories.

    Administrative Costs and Contingency

    • Administrative costs: costs related to the overall management of the project, normally not exceeding 7% of the direct costs.
    • Contingency: a planned provision for unforeseen project events or circumstances, normally not exceeding 5% of the direct costs.

    Budget: Non-Eligible Costs

    • Non-eligible costs include:
      • Debts and provisions for losses or debts.
      • Interest owed.
      • Items already financed in another framework.
      • Purchases of land.
      • Currency exchange losses.
      • Taxes.
      • Credits to third parties.

    Cost Estimator Software

    • Cost estimator software includes:
      • Microsoft Excel: widely used for project cost estimation with templates.
      • Other software with time- and budget-tracking functionality.

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    Project Budget Planning, Monitoring & Evaluation PDF

    Description

    Test your knowledge of project planning, budgeting, and evaluation. Learn when to develop a project budget and how to verify costs.

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