Hydraulic ram pumps and Sling Pumps

Key Factors for Sustainable Cost RecoveryVillage or local fundsVillagers can be encouraged to create a fund at local or village level for the maintenance of their watersupply. An initial deposit is put into a bank account, which is replenished through monthly or yearlycontributions. The bank account attracts interest on savings, and opens access to credits, deficits, andoverdrafts. Account holders can use their savings as a financial guarantee. The fund operates as asavings bank account managed by the bank. The fund can also be managed within a village or areasetting, without passing through a bank. Deposits and savings operate as a revolving fund, whichworks as micro-credit system through an association, as described above. The principal obstacle in thissituation is lack of financial management skills.2.4 Effective financial managementA great number of communities and, in some remote areas, municipalities as well, lack the financialmanagement skills which are essential to organise, implement and efficiently control a cost recoverysystem. A financial management system can be said to be effective when managers can:• estimate the revenue that the service will produce over defined periods of time and the expenditureit will need (budgeting);• collect fees from users (billing and collection);• keep all financial information and records (financial administration); and,• use indicators to control and monitor the financial performance of the enterprise (financial controland monitoring).2.4.1 BudgetingBudgeting is a basic aspect of financial management because it allows managers to:• plan revenue and expenditure for a determined period of time (usually one year);• determine in advance the amount of money required to cover total expenditure (wages, chemicals,fuel, repairs, interest, and so on);• estimate the revenue that the enterprise expects to receive for tariffs, registration, connections,loans and donations;• control actual expenditure and to compare it with planned expenditure, and to reveal possiblesources of imbalance (positive or negative) between actual and planned expenditure;• visualise the future of the committee, and answer such questions as: Where does the committeewant to go? What financial alternatives does the committee have?This process could be separated in four main stages:1. determining expenditure,2. estimating expenditure over a period of time,3. planning revenue,4. comparing revenue and expenditure.1. Determining expenditureThis should define total expenditure and identify how much money is necessary to cover it. There arefour main types of recurrent expenditure (costs) in the provision of water supply services: operation,maintenance, management (administration) and provision for future replacement (rehabilitation). Insome projects, replacement costs are not considered as recurrent costs, but as future investment costs.Investment costs can be included in the budget if necessary, for example, when an enterprise has topay off a loan for the construction of the system by instalments.One way to determine total expenditure is to list all the activities required to operate, maintain and tomanage the water supply service, and then to estimate personnel, inputs and purchases required foreach activity and their prices. There are two important conditions for doing this:The person doing the budgeting has to have good knowledge about all the activities needed to operate,maintain and manage the water supply system, and the prices that are paid in the market for each item.The budget should be for a defined period of time - usually one year.43