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September 9, 2009

Indirect Cost Recovery (ICR) Policy: 1 st Comprehensive Review From Inception (May 29, 2007) to December 31, 2008. September 9, 2009. Background. A new ICR policy: Full costing of activities: direct and indirect costs. Mechanism to recover indirect costs incurred.

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September 9, 2009

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  1. Indirect Cost Recovery (ICR) Policy: 1st Comprehensive ReviewFrom Inception (May 29, 2007) to December 31, 2008 September 9, 2009

  2. Background A new ICR policy: • Full costing of activities: direct and indirect costs. • Mechanism to recover indirect costs incurred. • Uneven growth between Regular Fund and Specific Funds. • Data on indirect costs was not clear. ICR 1st Comprehensive Review

  3. Basis of ICR Policy • Every $1 administered requires an additional $0.53 to cover indirect costs. • Only 6%, or $3 million, was being recovered from Specific Fund contributions. • $5.5 million were needed: $3 million + $2.5 million (Regular Fund). • New ICR rates: 11% for Member States and 12% for other donors. ICR 1st Comprehensive Review

  4. Report Structure • Preface • Cost of current administrative structure • Overview of financial results since ICR policy implementation • Details on ICR inflows and outflows • Conclusions • Next steps • Schedules ICR 1st Comprehensive Review

  5. Beginning Balance on June 1, 2007 $ 2.2 Add: ICR Collection $ 6.6 Interest Income 2.8 9.4 Available for Execution 11.6 Less: ICR Allocation 7.8 Transfer to the Regular Fund 1.2 9.0 Ending Balance on December 31, 2008 $ 2.6 ICR collection and utilization(for the 19 months from January 2007 to December 2008) (in millions) ICR 1st Comprehensive Review

  6. ICR inflows • “Grandfathered” 38.4 1.2 • Member State <= $20,000 0.3 - • Co-financed by Regular Fund 0.9 - • Unprogrammed Funds 7.7 - • Programmed at 11% or 12% 51.6 5.0 • Programmed at 10% or less 7.2 0.3 • Pending final negotiation with donors 13.7 - • Interest income - 2.9 ICR 1st Comprehensive Review

  7. ICR outflows • In 19 months, GS/OAS allocated $9.1 million of ICR collected. Total $9.1 million ICR 1st Comprehensive Review

  8. Conclusions I. Successes on the new ICR policy: • Simplified and centralized indirect cost recovery. • Uniform organizational recovery rate. • Identified where and how most indirect costs are incurred. • Promoted internal dialogue. • Confirmed that decentralized administrative units impact performance. ICR 1st Comprehensive Review

  9. Conclusions (continued) • Work remains to be done: • Misperceptions: • - Central administration captures ICR for its own benefit. • - ICR collected “belongs” to Secretariat managing the funds. • Misleading or negative communication to donors regarding ICR policy. • Incremental mandates not necessarily accompanied by required financing. • Donors having difficulty dealing with ICR requirements. ICR 1st Comprehensive Review

  10. Next Steps • Earmark ICR for infrastructure costs. • Reestablish a more coordinated management structure within each technical secretariat. • Maintain current ICR rates at the same level. ICR 1st Comprehensive Review

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