PED guidebook main sxn rev6. FINAL.pdf - LGRC DILG 10

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Strengthening Provincial/LocalPlanning and Expenditure ManagementProject Evaluationand DevelopmentUndiscounted Cash FlowsBeginningBalanceIn less Out forthe Year Ending Balance0 (4,000,000.00) (4,000,000.00)1 (4,000,000.00) (5,945,000.00) (9,945,000.00)2 (9,945,000.00) 101,000.00 (9,844,000.00)3 (9,844,000.00) 101,000.00 (9,743,000.00)4 (9,743,000.00) 101,000.00 (9,642,000.00)5 (9,642,000.00) 101,000.00 (9,541,000.00)6 (9,541,000.00) (249,000.00) (9,790,000.00)7 (9,790,000.00) 101,000.00 (9,689,000.00)8 (9,689,000.00) 101,000.00 (9,588,000.00)9 (9,588,000.00) 101,000.00 (9,487,000.00)10 (9,487,000.00) 101,000.00 (9,386,000.00)11 (9,386,000.00) (249,000.00) (9,635,000.00)12 (9,635,000.00) 201,000.00 (9,434,000.00)The above table implies that the project will not be able to pay for the cost of development,operations and maintenance out of the ISF collection. It appears that government will needto subsidize both the operations and maintenance.The alternative is to consider the cost of development as a grant. Another option is torequire counterpart payment. This latter option also fosters a sense of ownership amongthe farmer-users and may lead to more efficient operations and maintenance of the facility.The next table is the cash flow analysis. Note that it is constructed from the point of view ofthe farmers (or irrigators’ association) so that the development grant, amounting to P 4million and P 6million during years 0 and 1 (respectively) are treated as an inflow. The ISFcollection will then be able to finance the operations and maintenance as well as shoulderthe remainder of the loan.The debt payment is pegged at P 110,000.00 each year. Note that labor payments foroperations and maintenance is now P10,000.00. This means that we expect the irrigator’sassociation to provide labor counterpart as well. Still, government needs to extendassistance (which can be in terms of a loan) to finance the periodic maintenance on years6 and 11. In both years, the assistance will amount to P 345,000 in real terms,undiscounted. We recommend that the assistance on year 6 be treated as a grant whilethe assistance on year 11 be treated as partly grant, partly loan.The second table below shows the cash flow analysis from the point of view of LGU, sothat debt payment of the IA is treated as debt receipt and grants are treated as outflows.Note that this latter scheme results in slightly less burden on the LGU (PHP -8.87 million,discounted at 15%). Still, the very important question that should be answered is: “Is theprovince willing to extend this type of assistance? How can this subsidy and assistance bejustified?”RGEdillon January 200638
Strengthening Provincial/Local Project EvaluationPlanning and Expenditure Managementand DevelopmentInvestmentYear Phase (Total) Personnel MOOECash OutflowOperating PhaseCash Flow Analysis from the Point of View of the Irrigators' AssociationCash InflowMaintenanceCosts Debt Payment Total OutflowIrrigationService Fee Residual value Grant TOTALIN LESS OUT(CURRENTYEAR)Cash Flow0 4,000,000.00 4,000,000.00 4,000,000.00 4,000,000.00 - -1 6,000,000.00 6,000,000.00 55,000.00 5,945,000.00 6,000,000.00 - -2 10,000.00 4,000.00 150,000.00 110,000.00 274,000.00 275,000.00 275,000.00 1,000.00 1,000.003 10,000.00 4,000.00 150,000.00 110,000.00 274,000.00 275,000.00 275,000.00 1,000.00 2,000.004 10,000.00 4,000.00 150,000.00 110,000.00 274,000.00 275,000.00 275,000.00 1,000.00 3,000.005 10,000.00 4,000.00 150,000.00 110,000.00 274,000.00 275,000.00 275,000.00 1,000.00 4,000.006 10,000.00 4,000.00 500,000.00 110,000.00 624,000.00 275,000.00 345,000.00 620,000.00 (4,000.00) -7 10,000.00 4,000.00 150,000.00 110,000.00 274,000.00 275,000.00 275,000.00 1,000.00 1,000.008 10,000.00 4,000.00 150,000.00 110,000.00 274,000.00 275,000.00 275,000.00 1,000.00 2,000.009 10,000.00 4,000.00 150,000.00 110,000.00 274,000.00 275,000.00 275,000.00 1,000.00 3,000.0010 10,000.00 4,000.00 150,000.00 110,000.00 274,000.00 275,000.00 275,000.00 1,000.00 4,000.0011 10,000.00 4,000.00 500,000.00 110,000.00 624,000.00 275,000.00 345,000.00 620,000.00 (4,000.00) -12 10,000.00 4,000.00 150,000.00 210,000.00 374,000.00 275,000.00 100,000.00 375,000.00 1,000.00 1,000.00Cash Flow Analysis from the Point of View of the LGUDebt Receipts Grant IN less OUT PV at 15%0 - 4,000,000.00 (4,000,000.00) (4,000,000.00)1 - 5,945,000.00 (5,945,000.00) (5,169,565.22)2 110,000.00 - 110,000.00 83,175.803 110,000.00 - 110,000.00 72,326.794 110,000.00 - 110,000.00 62,892.865 110,000.00 - 110,000.00 54,689.446 110,000.00 345,000.00 (235,000.00) (101,596.99)7 110,000.00 - 110,000.00 41,353.078 110,000.00 - 110,000.00 35,959.209 110,000.00 - 110,000.00 31,268.8710 110,000.00 - 110,000.00 27,190.3211 110,000.00 345,000.00 (235,000.00) (50,511.66)12 210,000.00 - 210,000.00 39,250.50NPV (8,873,567.02)RGEdillon January 200639
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