Finance

Considering all the costs

WASH services are financially sustainable if the mix of financing flows is sufficient to cover all the different costs related to the service delivery, not only capital expenditure and basic operating costs - the two which are most commonly considered. 

IRC developed a life-cycle costing approach to get a detailed understanding of costs of service delivery. This approach identifies six cost categories, as explained in the figure below.

Figure 1: Cost categories considered as part of the life-cycle cost approach (click on the image to open it in larger format)

The Organisation for Economic Co-operation Development (OECD) identifies the three Ts as sources of financing for WASH services: tariffs (the contribution made by users), taxes (investments by governments, coming from nationally or locally levied taxes), and transfers (funding from international donors). Put simply, sustainable financing requires that the three Ts are matched with the six cost categories.

Tools & guidance

IRC has developed a comprehensive methodology for life-cycle cost analysis of WASH service delivery. This generic methodology consists of a detailed conceptual framework and guidance on data collection, processing and analysis. The methodology has also been adapted for WASH in specific settings, such as refugee settlements and schools. The on-line training course offers a complete introduction.

WASHCost Share is a web-based tool that provides support for compiling, processing and visualising life-cycle costs, as well as making it possible to zoom in on one or more of the cost categories for a more detailed analysis. It helps users evaluate: 

• Initial setup costs as well as recurrent expenditures (per person per year),
• Life-cycle costs compared against the level of service in a service area, and
• Data on the cost of household sanitation and public water supplies in service area.

Other tools available include:

• AtWhatCost (developed by Water For People based on IRC's WASHCost methodology), which provides insight into expenditure on operation and maintenance as well as capital maintenance (see Tools for costing Everyone Forever in Bolivia), and
• a framework to assess the cost effectiveness of hygiene interventions.

Resources