Budget Reallocation and Revision
UNDP Programme and Operations Policies and Procedures (POPP) are followed for budget reallocation and revision. It is imperative to note, however, that specific Global Fund requirements must also be adhered to.
A project document may be revised at any time by agreement among the signatories to the document. The purpose of the revision is to make substantive or financial adjustments and improvements to the project.
A formal change in the design of the project is called a substantive revision. Substantive revisions are made in response to changes in the development context or to correct flaws in the design that emerge during implementation. Substantive revisions may be made at any time during the life of the project.
On the basis of the year-end combined delivery report, the multi-year work plan shall be revised as needed to ensure a realistic plan for the provision of inputs and the achievement of results. In Atlas, resources that were budgeted for but not spent in prior years should be reallocated to current or future years. Within the year, in the interest of sound financial management, budgets must be kept up to date and aligned with agreed plans in order to properly assess progress and performance.
Tolerance is the permissible deviation from a plan (in terms of time and cost) without bringing the deviation to the attention of the next higher authority. This aspect is particularly important with respect to Global Fund budgets.
Refer to the following guidance:
UNDP Programme and Operations Policies and Procedures (POPP) on Implementing a Project.
Global Fund policies and procedures are documented in:
- Global Fund Guidelines for Grant Budgeting and Annual Financial Reporting – Section 5 on budgetary adjustments during grant implementation.
- Global Fund Operational Policy Manual – Operational Policy Note on Reprogramming during Grant Implementation.
In the normal course of grant implementation, a Principal Recipient (PR) should undertake periodic budget reviews to identify necessary budget changes and may undertake budgetary adjustments to respond to programme realities. Budget adjustments are classified as “material” and “non-material” for the processing and approval of budget adjustments.
It should be noted that the thresholds noted below are cumulative for the entire implementation period and are always compared to the original approved budget at the time of grant signing to establish the materiality level.
Material budgetary adjustments are defined as:
- budget changes to the official approved budget based on the maximum threshold of +/-15 percent of any approved intervention, or
- budget changes exceeding +5 percent of the total budget for a certain number of categories, referred to as discretionary categories. Adjustments on discretionary categories are calculated on the cost grouping budget for the full implementation period. It is not supposed to be calculated on the cost input budget of a given year.
The general definition for the Global Fund discretionary categories for a given grant includes:
- Human resources;
- Travel-related costs (per diems, etc.);and
- Indirect costs/overheads.
The discretionary categories may be predefined taking into account country context and grant-associated risks and may include any other predefined activities included in the approved budget. Grant-specific discretionary categories must be stipulated in the grant agreement or communicated to the PR through a performance letter or other official legal notifications.
All material adjustments for the grant should be submitted to the Country Team for pre-approval prior to the initiation of the activity and the related payment. The submission should be in the form of a revised detailed budget incorporating the proposed adjustments within the overall ceiling of the initial approved budget. Payment of expenditures by the PR with material variances without Global Fund pre-approval (through a revised detailed budget) is not permissible.
Non-material budgetary adjustments are defined as budget changes to the officially approved budget below the maximum threshold of +/-15 percent and below the threshold of the discretionary categories (or of any other threshold communicated by the Global Fund in the grant agreement or any other official legal notifications) of any approved intervention. These adjustments do not require pre-approval from the Global Fund.