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Financial Sustainability of WASH Services Dominique Senn, seecon international gmbh Financial Sustainability of WASH Financial Sustainability of WASH Services Dominique Senn, seecon international gmbh Financial Sustainability of WASH Services

Find this presentation and more on www. sswm. info Copyright & Disclaimer Copy it, Find this presentation and more on www. sswm. info Copyright & Disclaimer Copy it, adapt it, use it – but acknowledge the source! Copyright Included in the SSWM Toolbox are materials from various organisations and sources. Those materials are open source. Following the opensource concept for capacity building and non-profit use, copying and adapting is allowed provided proper acknowledgement of the source is made (see below). The publication of these materials in the SSWM Toolbox does not alter any existing copyrights. Material published in the SSWM Toolbox for the first time follows the same open-source concept, with all rights remaining with the original authors or producing organisations. To view an official copy of the Creative Commons Attribution Works 3. 0 Unported License we build upon, visit http: //creativecommons. org/licenses/by/3. 0. This agreement officially states that: You are free to: • Share - to copy, distribute and transmit this document • Remix - to adapt this document. We would appreciate receiving a copy of any changes that you have made to improve this document. Under the following conditions: • Attribution: You must always give the original authors or publishing agencies credit for the document or picture you are using. Disclaimer The contents of the SSWM Toolbox reflect the opinions of the respective authors and not necessarily the official opinion of the funding or supporting partner organisations. Depending on the initial situations and respective local circumstances, there is no guarantee that single measures described in the toolbox will make the local water and sanitation system more sustainable. The main aim of the SSWM Toolbox is to be a reference tool to provide ideas for improving the local water and sanitation situation in a sustainable manner. Results depend largely on the respective situation and the implementation and combination of the measures described. An in-depth analysis of respective advantages and disadvantages and the suitability of the measure is necessary in every single case. We do not assume any responsibility for and make no warranty with respect to the results that may be obtained from the use of the information provided. Financial Sustainability of WASH Services

Find this presentation and more on www. sswm. info Contents 1. Introduction 2. Financial Find this presentation and more on www. sswm. info Contents 1. Introduction 2. Financial Sustainability Framework 3. Cost Analysis Tools 4. References Financial Sustainability of WASH Services 3

Find this presentation and more on www. sswm. info 1. Introduction Investing in WASH Find this presentation and more on www. sswm. info 1. Introduction Investing in WASH Services (1/4) • Recently, much effort has been directed towards the spatial expansion of WASH (Water, Sanitation and Hygiene) services. Source: http: //de. slideshare. net/ircuser/costing-sustainable-services-the-lifecycle-cost-approach-12113668 [Accessed: 28. 08. 2013] Financial Sustainability of WASH Services 4

Find this presentation and more on www. sswm. info 1. Introduction Investing in WASH Find this presentation and more on www. sswm. info 1. Introduction Investing in WASH Services (2/4) • Spatial expansion = creation of new or up-scaling of existing infrastructure need for initial capital investment Financial Sustainability of WASH Services Source: http: //tap. waterforpeople. org/usercontent/site_6/s 13/1000139565/179/watertaps. jpg? extra=FA [Accessed: 27. 08. 2013]; MORGAN (2007) 5

Find this presentation and more on www. sswm. info 1. Introduction Investing in WASH Find this presentation and more on www. sswm. info 1. Introduction Investing in WASH Services (3/4) • With elevated coverage rates (>60%), most money should be spent in existing infrastructure in order to maintain the service level. Financial Sustainability of WASH Services Source: http: //tap. waterforpeople. org/usercontent/site_6/s 13/1000139565/179/watertaps. jpg? extra=FA [Accessed: 27. 08. 2013]; http: //etc. usf. edu/clipart/37600/37662/hdstack-07_37662_lg. gif [Accessed 27. 08. 2013]; MORGAN (2007) 6

Find this presentation and more on www. sswm. info 1. Introduction Investing in WASH Find this presentation and more on www. sswm. info 1. Introduction Investing in WASH Services (4/4) Spatial coverage maintenance need for capital ! recurrent expenditures, support efforts, capital expenditure Source: MORIARTY (2011) Financial Sustainability of WASH Services 7

Find this presentation and more on www. sswm. info 1. Introduction Importance of Financial Find this presentation and more on www. sswm. info 1. Introduction Importance of Financial Sustainability of WASH Services (1/3) • But, in most cases, donors concentrate exclusively on initial capital expenditures. • Accounting for recurrent costs is often forgotten. Infrastructure decays, resources are wasted, people have no access to water and sanitation services. It is estimated that in rural areas 30 -40% of WASH systems do not function or operate significantly below design expectations (AGUASAN 2012). Source: http: //www. philippinecollegian. org/wpcontent/uploads/2013/07/inside-illus-e 1374721492923 -900 x 425. jpg [Accessed: 23. 08. 2013] Financial Sustainability of WASH Services 8

Find this presentation and more on www. sswm. info 1. Introduction Importance of Financial Find this presentation and more on www. sswm. info 1. Introduction Importance of Financial Sustainability of WASH Services (2/3) To keep water and sanitation systems functioning, regular capital maintenance is indispensable. Regular capital maintenance (blue line) is indispensable to avoid a decline of service levels (red line). Source: FRANCEYS & PEZON (2010) Financial Sustainability of WASH Services 9

Find this presentation and more on www. sswm. info 1. Introduction Importance of Financial Find this presentation and more on www. sswm. info 1. Introduction Importance of Financial Sustainability of WASH Services (3/3) To ensure regular capital maintenance and financial sustainability, ALL costs need to be considered when WASH systems are planned! Source: AGUASAN (2012) Cost and finance planning must be an integral part of ensuring sustainability. Financial Sustainability of WASH Services 10

Find this presentation and more on www. sswm. info 1. Introduction Cost Components of Find this presentation and more on www. sswm. info 1. Introduction Cost Components of WASH Services (1/2) CAPITAL EXPENDITURE Initial costs of putting new services into place: „hardware“ such as pipes, toilets and pumps and oneoff „software such as training and consultations. OPERATION AND Routine maintenance and operation costs that are MINOR crucial to keep services running, e. g. wages, fuel, or MAINTENANCE any other regular purchases. Neglect has long-term consequences for service delivery. CAPITAL MAINTENANCE Financial Sustainability of WASH Services Occasional large maintenance costs for the renewal, replacement, and rehabilitation of a system. These essential expenditures are required before failure occurs to maintain a level of service. This is one of the most frequently „forgotten“ costs. 11

Find this presentation and more on www. sswm. info 1. Introduction Cost Components of Find this presentation and more on www. sswm. info 1. Introduction Cost Components of WASH Services (2/2) EXPENDITURE DIRECT SUPPORT Pre and post-construction support costs not directly related to implementation, e. g. training for community or private sector operators or user groups. These costs are necessary to achieve long-term functionality and scale. EXPENDITURE INDIRECT SUPPORT The costs of planning and policy making at governmental level and capacity building of professionals and technicians. These costs have a direct impact on long-term sustainability. COST OF CAPITAL The cost of borrowing money or investing in the service instead of another investment opportunity. It has a direct impact on the ability to maintain a service financially. Financial Sustainability of WASH Services 12

Find this presentation and more on www. sswm. info 1. Introduction Tools to Ensure Find this presentation and more on www. sswm. info 1. Introduction Tools to Ensure Financial Sustainability of WASH Systems Cost and finance planning must be an integral part of ensuring sustainability. • Tools, which can help to ensure that WASH Services are sustainably financed and deliver services long after their implementation are: ◦ Financial sustainability frameworks ◦ Cost analysis tools, including: - Life-cycle costs analysis - Cost-benefit analysis - Strategic financial planning Financial Sustainability of WASH Services 13

Find this presentation and more on www. sswm. info 2. Financial Sustainability Framework Six Find this presentation and more on www. sswm. info 2. Financial Sustainability Framework Six Key Elements to Financial Sustainability of WASH Services Source: http: //www. skat. ch/publications/prarticle. 2005 -09 -29. 5069774463/prarticle. 2005 -09 -29. 1875579521/skatpublication. 2012 -12 -19. 5550148854/image 1 [Accessed: 23. 08. 2013] Financial Sustainability of WASH Services 14

Find this presentation and more on www. sswm. info 2. Financial Sustainability Framework Important Find this presentation and more on www. sswm. info 2. Financial Sustainability Framework Important Aspects of the Key Elements (1/2) Conducive legal and policy framework; defined roles and responsibilities of all stakeholders; independent regulatory body; predictable sector financing and planning; monitoring and evaluation; accountability and transparency. Identification, quantification and monitoring of recurrent costs in their entirety; match costs with revenues; include often forgotten costs; ensure availability of necessary capital maintenance funding. Equitable bearing of burdens of improved services; mobilize revenues from tariffs, taxes and transfers; assure access to the poor. Financial Sustainability of WASH Services 15

Find this presentation and more on www. sswm. info 2. Financial Sustainability Framework Important Find this presentation and more on www. sswm. info 2. Financial Sustainability Framework Important Aspects of the Key Elements (2/2) Integration of the socio-cultural context; responsiveness to institutional and organisational contexts, household-centred problem-solving. Administrational, managerial, technical and analytical capacity building; institutional development; resources allocation; training activities; institutional support. Committed leadership; demand-responsiveness and understanding at the local level; advocacy strategies; identify, understand value economic benefits. Financial Sustainability of WASH Services 16

Find this presentation and more on www. sswm. info 3. Cost Analysis Tools Three Find this presentation and more on www. sswm. info 3. Cost Analysis Tools Three Tools for Financial Planning ch proa Ap osts alysis C Cycle efit An ng Life- t-Ben lanni • P ncial Cos a • ic Fin eg Strat • Source: http: //www. skat. ch/publications/prarticle. 2005 -09 -29. 5069774463/prarticle. 2005 -09 -29. 1875579521/skatpublication. 2012 -12 -19. 5550148854/image 1 [Accessed: 23. 08. 2013] Financial Sustainability of WASH Services 17

Find this presentation and more on www. sswm. info 3. Cost Analysis Tools Life-Cycle Find this presentation and more on www. sswm. info 3. Cost Analysis Tools Life-Cycle Costs Approach Objective: to estimate the disaggregated costs of all elements of service provision to ensure delivery of an adequate, equitable and sustainable WASH service level to a population in a specified area. Source: AGUASAN (2012) Financial Sustainability of WASH Services 18

Find this presentation and more on www. sswm. info 3. Cost Analysis Tools Cost-Benefit Find this presentation and more on www. sswm. info 3. Cost Analysis Tools Cost-Benefit Analysis (1/2) Objective: to understand the relation between costs and benefits of a water supply or sanitation policy or intervention and compare them in monetary units. Benefits: • Health benefits • Environmental benefits • Social and private benefits • Broader economic benefits • . . . Source: http: //www. rollonfriday. com/Portals/0/Images /cost_benefit. jpg [Accessed: 25. 08. 2013] Financial Sustainability of WASH Services Costs: • Capital expenditure • Cost of capital • Operation and maintenance expenditure • Capital maintenance expenditure • Expenditure on direct support • Expenditure on indirect support 19

Find this presentation and more on www. sswm. info 3. Cost Analysis Tools Cost-Benefit Find this presentation and more on www. sswm. info 3. Cost Analysis Tools Cost-Benefit Analysis (2/2) Compare different policy or intervention options e. g. with regard to their benefit-cost ratio (ratio by which benefits exceed costs), internal rate of return (annual rate of return on an investment) or payback period (period after which the net benefits become positive). Benefit-cost ratios of different sanitation service options. Source: WSP (2011) utilise these results for better advocacy and decision-making. Financial Sustainability of WASH Services 20

Find this presentation and more on www. sswm. info 3. Cost Analysis Tools Strategic Find this presentation and more on www. sswm. info 3. Cost Analysis Tools Strategic Financial Planning (STF) Objective: make financing of infrastructure and services more predictable by considering different aspects in a comprehensive longterm analysis. Financial needs of the sector and factors affecting them. STF: comprehensive Main sources of long-term analysis How needs can be reconciled with potential resources. funds and balance between them. Financial Sustainability of WASH Services 21

Find this presentation and more on www. sswm. info 6. References AGUASAN (Editor) (2012): Find this presentation and more on www. sswm. info 6. References AGUASAN (Editor) (2012): Briefing Note: Financial Sustainability of WASH Services – About Mindset Change and an Eye for the Future. St. Gallen: SDC, Eawag/Sandec, HELVETAS, Skat. URL: http: //www. aguasan. ch/ws 2012/AGUASAN 28_briefing_note. pdf [Accessed: 23. 08. 2013] FRANCEYS, R. ; PEZON, C. (Editor) (2010): Services are forever: The importance of capital maintenance (Cap. Man. Ex) in ensuring sustainable wash services. Briefing Note 1 b. The Hague: IRC International Water and Sanitation Centre. URL: http: //www. washcost. info/page/866 [Accessed: 24. 08. 2013] MORGAN, P. ; Eco. San. Res (Editor) (2007): Toilets That Make Compost. Stockholm: Stockholm Environment Institute. MORIARTY, P. (2011): Life-cycle cost approach policy meeting. Unpublished presentation. WSP (Editor) (2011): The Economic Returns of Sanitation Interventions in Yunnan Province, People’s Republic of China. Washington DC: Water and Sanitation Programme, Worldbank. URL: http: //www. wsp. org/sites/wsp. org/files/publications/wsp-yunnan-economic-returns. pdf [Accessed: 23. 08. 2013] Financial Sustainability of WASH Services 22

“Linking up Sustainable Sanitation, Water Management & Agriculture” SSWM is an initiative supported by: “Linking up Sustainable Sanitation, Water Management & Agriculture” SSWM is an initiative supported by: Created by: Financial Sustainability of WASH Services 23