Secure Funding

7/30/2019 Secure Funding

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Continuous Improvement & Benchmarking

Secure funding

Innovate

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2 Continuous Improvement & BenchmarkingModule: Secure funding

Learning objectives

Have the skills to:

Identify different sources offunding

Develop a cash flow forecast Offer benefits for a sponsor

Prepare a proposal

Identify sponsors

Document an agreement

SourcesCash flowBenefitsProposalSponsorsAgreement




Sources of funding for improvements

Increase in general tax

Additional specific tax

Customer fees/ charges

Re-allocation of budget headings

Sponsorships Loans

Grants tied and untied

Sale of assets (and possible lease back)

Call in outstanding debtors Delay discretionary capital works

Build, Own, Operate, Transfer schemes(BOOT)




Develop a cash flow forecast

Revenues (cash inflow) Customer fees or charges – do

this first if applicable

Other known revenues Costs (cash outflows)

Capital investment

Change over costs

Recurrent operations Ongoing repairs, maintenance

Contingency allowance

Cost the full

service, or just the

incremental costs

and revenues




Cash flow forecast

Cash flow forecast for the introduction of improved public toiletsYear 1 2 3 4 5

Cash inflow

Current budget allocation from council 100,000 100,000 100,000 100,000 100,000

State government grant for this project already secured 200,000

Normal government subsidy we get to-day 10,000 10,000 10,000 10,000 10,000

Toilets in operation 20 170 220 270 270

New users per toilet (person visit) 500 500 500 500 500

New user charge quantity 10,000 85,000 110,000 135,000 135,000New use charge fee rate 10 10 10 10 10

Total new user charges 100,000 850,000 1,100,000 1,350,000 1,350,000

Total cash inflow 410,000 960,000 1,210,000 1,460,000 1,460,000

Cash outflow

Recurrent labour 80,000 680000 880000 1080000 1080000

Recurrent consumables 15000 127500 165000 202500 202500

Recurrent utility charges - water, electricity 5000 42500 55000 67500 67500

New toilet construction number 20 150 50 50 0New toilet construction unit cost 5,000 5,000 5,000 5,000 5,000

New toilet construction total cost 100,000 750,000 250,000 250,000 -

Total cash outflow 200,000 1,600,000 1,350,000 1,600,000 1,350,000

Net cash flow position per annum 210,000 (640,000) (140,000) (140,000) 110,000

Cumulative net cash flow position 210,000 (430,000) (570,000) (710,000) (600,000)




A funder will be looking for……

What is the peak amount of cashrequired ?

Is the service ever self funding ?

When will cash flow turn positive ? Is there capacity to repay a loan ?

How long will it take to repay a loan ?

Will an interest charge make the

service unaffordable ? Does the City have assets to secure

the loan ?




Benefits for a sponsor

Public exposure

Recognition

Access to a customer list

Potential to up-sell to the customer

Naming rights

Exclusivity in the market place

Association with safety, the environment, publicresponsibility, health, growth, opportunities,education




Preparing a proposal

1. Project overview – purpose, outcome

2. Cash flow forecast

3. Assumptions and risks with finance

4. Amount of sponsorship sought

5. Benefits that may be offered to asponsor

6. Special conditions or exclusions7. Role of the sponsor in the project

8. On-going role in the service provision




Who may be a sponsor for improvements

Retailers

Manufacturers

Energy utilities

Financial services

Private schools

Sector specialists – IT, Transport

State and Federal Governments

NGOs




Agreements

Simple letter

Formal contract Names and addresses

Nature of the project; purpose, outcome, benefits

Amount of funds

Payment profile and trigger points for instalments

Repayment requirements

Conditions on repayments

Security; guarantees on the repayments

Rights and privileges of the donor/ sponsor

Limitation on both parties to protect the rights andprivileges




Update the Implementation plan

With terms and conditions that require aspecific action: Open a Bank account

Request an instalment payment Report project progress to the sponsor

Hold progress meetings

Provide evidence of milestone achievements

Confirm sponsor’s benefit is in place Report upon sponsor’s benefit condition/ status

Report upon project take-up/ utilisation




Disclaimer

The views expressed in this Toolkit are the views of the authors and do not necessarily reflect the views or policies of the Asian Development Bank (ADB) or Asian Development Bank Institute (ADBI), or their Board of Directors, or the governments they represent. ADB and ADBI do not guarantee the accuracy of the data included in this CD-ROM and accepts no responsibility for

any consequences of their use. Terminology used may not necessarily be consistent with ADB official terms.

Secure Funding

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