Please note: this is a beta-version of the Retrospective Currency Converter; this tool is currently being tested in several countries. We invite you to use the tool and send us your feedback. Contact us in case you have any questions or suggestions via kerk@ircwash.org. This tool has been developed by IRC and Aguaconsult.
Understanding the costs of supplying sustainable water, sanitation, or hygiene (WASH) services is an important first step to be able to finance and plan for these services. Methodologies, such as Life Cycle Cost Analysis, have been developed to analyse and predict these costs. These methodologies often involve reviewing historical records of expenditures in an effort to derive estimates that can be used for financial planning purposes.
The reliability of these estimates is related to the number of data points that are analysed to derive the estimates. For example, in order to understand the operating costs of pump, it is better to review a database of annual expenditures that covers 5-10 years versus reviewing only the past year. Having multiple years of data will provide more reliable estimates and account for any outliers that might lead to over or underestimates of the costs.
However, when doing the analysis to derive the cost estimates, it is important to compare like with like. Therefore historical expenditures need to be adjusted, brought to a common year and currency to be compared.
We understand that a dollar (or euro, pound, etc.) today is worth more than dollar in ten years’ time. Similarly, the present value of a dollar that will be spent ten years from now is less than the value of today’s dollar. Projecting future expenditures is done using the present inflation rate. Similarly to understand what the present value is of previous expenditures it is necessary to “deflate” the value of those past expenditures using a historical record of inflation rates.
The Retrospective Currency Converter can be used in three different ways:
1) Past Year to Present Year for one currency- This tool allows you to deflate past expenditures to understand present value or the value at a given year after the expenditure was made. For example, if you have expenditures in USD from 1966 you could determine the value in 2015 USD (or 1967).
2) Past Year to Present Year and converting currencies- The tool has the ability to deflate past expenditures in one currency, and the convert the currency in the desired year. For example you could calculate an expenditure from 1966 made in Rwandan Francs to USD in 2015 (or any other year between 1966 and 2015).
3) Convert currencies-It also allows you to convert between any global currency to any other global currency. If you have an expenditure in Rwandan Francs in 2015 you could convert to USD in 2015.
There are multiple ways to deflate past expenditures. The most common is done using the macro economic data such as the purchasing power parity (PPP) or the Gross Domestic Product (GDP) of a country. There are advantages and disadvantages of using both, however the Retroactive Currency Converter uses the GDP deflator for the present value calculations.
Similarly, currency conversion can be done using various rates. Conversion rates vary in real time, therefore it is necessary to utilise average figures.
The World Bank maintains an updated database of financial information including a GDP deflator and the official exchange rates of all global currencies. The definitions of each indicator are as follows:
GDP deflator (annual %) - Inflation as measured by the annual growth rate of the GDP implicit deflator shows the rate of price change in the economy as a whole. The GDP implicit deflator is the ratio of GDP in current local currency to GDP in constant local currency.
Official exchange rate (LCU per US$, period average)-Official exchange rate refers to the exchange rate determined by national authorities or to the rate determined in the legally sanctioned exchange market. It is calculated as an annual average based on monthly averages (local currency units relative to the U.S. dollar).
These data are found at http://data.worldbank.org/indicator. If you are connected to the internet, from the home screen of the tool you can update the dataset. The home screen lists the date that the data used in the tool was last updated. World Bank updates the data on an annual basis.
Tool that helps you to understand what the present value is of previous expenditures. It "deflates" the value of those past expenditures using a historical record of inflation rates.
Handout from the life-cycle cost approach course which gives useful background information on cost conversion.
Please note: this is a beta-version of the Costing and Budgeting Tools; these tools are currently being tested in several countries. We invite you to use the tools and send us your feedback. Contact us in case you have any questions or suggestions via training@ircwash.org
The tools have been developed by IRC, Water for People and Aguaconsult. They build on Water for People’s “Everyone Forever” programme and IRC’s work on life-cycle costing and financing of sustainable water and sanitation services. Have a look at IRC’s costing and finance webpage for more information.
This set of tools is developed to support district authorities in planning and budgeting for sustainable water services in their district or municipality. To provide sustainable water services for the entire population in districts, it is important that all costs related to service delivery are taken into account. This includes costs for implementation of infrastructure, costs for operation and maintenance, costs related to administration and costs to replace the infrastructure. All these costs need to be financed. And the finances need to be planned. These tools help you to analyse costs related to each category and create a financial overview for your district.
These tools can be used by anyone interested in planning and budgeting for sustainable water services at the district level. The set of tools is specifically designed for (service) authorities at the district level or organisations supporting these authorities. One of the tools (Cash flow analysis tool) is specifically designed for service providers.
The tools have been designed in such a way that each tool can be used separately. The navigation buttons allow you to easily browse through all the tools. Each tool has an instruction page and provides links to websites with more background information. This tool is pre-populated with some data so you can quickly see how it works. Scroll through the sheets to get acquainted with the potential of the tool. Don’t forget to delete the data that is there once you start entering your own data.
The tools are developed in Excel, as this is the software most commonly understood and in use among municipal officers. The names and functions in each of the tools (in grey cells) can be edited to tailor the tool to the local context. The tool is set in "full screen" mode. You can change this by double-clicking on the tool. Under the "view" option you can then also choose to show headings, formula bars etc.
The sheets are locked to protect the formula in the sheets. If you want to unlock the sheets to view or change the formula, you can do that by going to File > Info > and then click on "Unprotect" for the sheet you want to unlock. The password for unlocking sheets is "cbt16".
The set of tools is based on two key conceptual frameworks: 1) life-cycle costs and 2) infrastructure asset management.
1) Life-cycle costs refer to all the costs that are incurred in the various phases in the life-cycle of a water services; from the implementation of the infrastructure, to its operation and maintenance, and eventual replacement. If certain costs are left out, this is sooner or later reflected in a reduced level of service and poor sustainability. The different cost-components we take into account in costing water and sanitation services are:
The other two cost categories – expenditure on indirect support and cost of capital – are not further explained here, as they are normally assumed at national level, and therefore not considered in these tools. Click here for more information about the life-cycle cost approach.
2) Infrastructure asset management is an approach to optimise the costs of installing and maintaining infrastructure so that it keeps on providing an adequate service level. This implies: i) maintaining an up-to-date register of all assets in an area; ii) defining the service levels to be provided, and iii) understanding how assets fail (e.g. a slow deterioration or sudden failure). Based on this, one can make a projection of when and how to replace certain assets. Combining this information with life-cycle cost data allows then projecting at which moments in time replacements of rehabilitations need to happen and what that would cost.
These tools help you to analyse costs and create a financial overview for your district.
