The Cost of Selective Feeding (Special Supplement 2)

by Rose Caldwell & Alistair Hallam (Valid International)

The aim of this paper is to present the cost per beneficiary of CTC and discuss aspects of these costs, underlying assumptions and other factors and issues affecting cost.

The costs discussed are all based on CTC programmes operated by Concern Worldwide and supported by Valid International. All cost information has been supplied by the Concern field accountants for each country, and is based on the total cost of operating the programme in country. The costs have been recorded and categorised using Concern Worldwide field accounting policies and procedures, an overview of which is outlined below.

Field accounting

Direct Costs

These costs relate to the day-to-day recurring running costs of the programme such as:

• Salaries and staff related costs (e.g. per diems, training) of national staff and international staff working directly on the programme such as nutritionists, food advisors, storekeepers and nurses.
• Food and medicine costs - used in both therapeutic and supplementary components of the CTC programme, including that provided by other agencies such as UNICEF/UNWFP in the way of material aid. This has been adjusted for any unused stock at the end of the period under consideration. This cost also included the cost of transportation of the items to their final destination, which, as reflected in cases such as South Sudan described later, is significant.
• Consumable and miscellaneous items such as scoops, protective clothing, stationery etc.

Capital Costs

These costs relate to the once-off capital purchases required for the programme and include the purchase of motor vehicles, communications and computer equipment, clinical equipment and any construction /renovation costs. The programmes under consideration in this cost analysis had only just begun operating. Since Concern Worldwide operate a policy of expensing costs on purchase, the full costs of capital items are fully allocated to the CTC costs. This effectively inflates costs, since the majority of the capital equipment would expect to have a useful economic life of 3-5 years. Arguably, using a method of capital depreciation (thus spreading these costs over a longer period) would provide a sounder analysis.

Local Office Overheads & Country Office Overheads

Concern Worldwide allocates overheads to programmes on two levels, local office overheads and country office overheads. For example, Concern Worldwide in Ethiopia will have a Country Office in Addis Adaba and a local office in Wollo. The local office in Wollo is likely to run several different programmes such as agriculture, health and community development programmes as well as the CTC programme. Similarly, the country office is likely to support more than one local office. The costs of local and country offices are categorised as transport, expatriate and administrative costs. The costs of both these offices will be allocated to the CTC programme and reflect, as closely as possible, the use of the resources. For example, local office transport allocation may be based on the number of vehicles used in each programme, whilst country office transport allocation will be based on the mileage of country office vehicles to each local office.

Cost Exclusions

The costs presented here do not include significant costs relating to the Head Office of Concern Worldwide, which provides support to Country Offices.

Rate of Exchange

The rate of exchange used by the field office, to translate the costs from local currency into USD, sterling or euro, is the average rate obtained in the period under consideration. The rate of exchange used to convert USD/ sterling costs into euro was provided by Concern Worldwide and is the average for the period Jan 2003 to Aug 2003 (1 euro = 1.1 USD/0.693 sterling)

Number of Beneficiaries

At the time of the cost analysis, all these programmes were still operational. As a result, it was decided to use number of beneficiaries admitted to the programme as opposed to number recovered, as many were still in the programme

Programme costs

International standards for selective feeding, recommend that therapeutic feeding programmes should not be run in isolation of supplementary feeding programmes. In CTC, this interdependence is even more marked as the OTP element of the CTC is implemented by the same teams and through the same structures as the supplementary feeding element. However, to aid comparison with the costs of running TFC programmes, the total costs have been split into therapeutic (OTP) and supplementary (SFP) (see table 19). This is a very tentative split and a number of assumptions were made in order to do this, namely:

• Costs for all items used directly for both OTP and SFP programme beneficiaries, e.g. weighing equipment, distribution centre setup, supplementary food etc, were split according to the ratio of SFP:OTP beneficiaries.
• Costs for outreach and distribution staffing used for both OTP and SFP programme beneficiaries were split 50:50. Although the proportion of OTP beneficiaries is smaller, a relatively higher proportion of these staff's time was focused on the severely malnourished.
• Overheads used for both OTP and SFP programme support were split according to the ratio of SFP:OTP beneficiaries.

Based on the analysis, the cost per beneficiary for the CTC programme as a whole (including SFP, OTP and SC elements) varied from 114 euro in South Sudan to 62 euro in Ethiopia, as detailed in Table 20.

The variations in costs between country programmes, reflected in table 20, relate to the following factors:

South Sudan

South Sudan is recognised as a difficult and expensive country in which to operate. High costs are inccurred for the transportation of food, medicines and staff, much of which has to be flown in from Kenya. In addition, this programme was only operational for four months at the time of the analysis and therefore the full cost of set up/capital expenditure has been borne by relatively few beneficiaries. One would expect the cost per beneficiary at the end of the programme to be substantially less.

Malawi

Two major factors affected Malawi's cost. First, the high overhead costs allocated to the CTC programme and second, the high cost of vehicles. High overhead costs were incurred by the programme as Concern Worldwide had begun working in Malawi only six months prior to the period under review. During this period, Concern had few programmes operational in Malawi and hence the CTC programme was carrying a far higher than normal burden of overheads, including the costs of setting up the standard Concern infrastructure - vehicles, communication and IT equipment, etc. The vehicle costs were high because for most of the time of this review, Concern was not a registered NGO in Malawi and there were no duty free arrangements in place for importation of vehicles (duty over 100%). Consequently, the CTC programme rented several 4x4 vehicles at high cost for most of the first year of the programme, before buying new vehicles.

Ethiopia

Ethiopia is a well-established Concern Worldwide field operation, with many programmes which are relatively inexpensive to run. Hence the cost per beneficiary in this case is lower than in the two other examples.

Influences on cost-effectiveness of CTC programmes

One of the most important factors affecting the cost per beneficiary is the number and the density of beneficiaries. Unlike traditional TFC programmes, CTC does not have a capacity limitation in relation to its fixed costs. In other words, once the initial capital and set-up costs have been expended, the number of beneficiaries that can be treated within a particular geographical area is not limited. Hence, the cost per beneficiary continues to decrease as the number of beneficiaries increases. Table 21 presents a sensitivity analysis that considers the impact on the cost per beneficiary of changing beneficiary numbers by 1000 and 2000.

Experience to date has helped identify a number of other factors that influence the cost-effectiveness of the CTC approach:

• The focus on achieving high coverage requires a good logistics system. Clearly, the higher the density of severely malnourished children in a given geographical area, the cheaper the logistics of bringing food to them.
• Costs will be greatly reduced where the basic infrastructure of the NGO operating the programme is already in place.
• The use of existing (health) physical and logistic infrastructure and staff reduces costs. This is especially true in the case of outreach capacity. Outreach is an expensive activity for an NGO to set-up and run independently. Where existing systems of outreach can be utilised, costs are decreased considerably. In countries where formal health structures are weak, it would be useful to try and build CTC outreach around non-formal community networks, in an attempt to increase cost-effectiveness.
• The rate of recovery of children influences cost. Experience from CTC programmes to-date indicates that about 20% of children recover very slowly in the community. This increases costs - of extra distributions of RUTF, of extra surveillance (weighing and measuring), and of follow-up. Ways of supporting these children and improving recovery rates need to be investigated.
• The quality of the roads - self evidently, the better the roads, the cheaper it is to transport staff, equipment and supplies to where they are needed.
• Availability of storage at CTC distribution sites - if this is available, fewer trips are required.
• Local production possibilities - this cuts down import and tax costs of RUTF supplies.

Difficulties comparing TFC and CTC Costs

Comparing costs of TFCs and CTC programmes is difficult for several reasons:

• CTC programmes are multi-sectoral and it is very hard to differentiate between supplementary feeding, outpatient therapeutic care, stabilisation centre care, education, hygiene promotion, outreach, mobilisation costs etc.
• The TFC model is a fixed capacity model compared with the almost limitless capacity of a CTC programme, making it vital to compare the contexts in which the two programmes operate.
• A comparison on a purely cost per beneficiary basis is not necessarily appropriate given the different nature and impacts of the two programmes. The initial set up costs invested in CTC can be seen as an investment in the future, as a CTC programme puts in place much of the infrastructure for the emergency response to become a longer-term nutrition programme. This is not usually the case with TFC programmes.
• Humanitarian aid managers are often guilty of only including the direct costs of their programmes in their analysis of cost effectiveness, and ignoring other costs borne by the communities being helped. Traditional TFC programmes incur significant costs for the families and communities of programme beneficiaries that need to be included in any comparative analysis of CTC and the TFC approach. In the latter, mothers are removed from their families for up to a month, in order to stay with the child in the TFC. Siblings of the malnourished child are deprived of maternal care for this period. Furthermore, the mother is unavailable to work in the fields or participate in other incomegenerating activities during this time. All of this imposes a significant opportunity cost on the family and community - a cost that is largely avoided in the CTC model.

In order to satisfactorily provide a cost comparison, a comprehensive piece of work needs to be undertaken, taking into consideration both quantitative and non quantitative factors that influence direct and indirect costs to programmes and their beneficiaries.