12.4.4 Financial management at town level
As you learned in Study Session 10, towns are categorised into three levels:
What are the three categories of town?
Towns that have utilities managed by a Water Board, towns with utilities but without a Water Board, and those with only WASHCOs.
Larger towns in the first two categories with populations greater than 20,000 receive funds by loan through the Water Resources Development Fund (WRDF). Towns with a population of fewer than 20,000 receive funds by grant through the relevant BoFED. These two funding arrangements for towns are further described below.
Loan financing
Water utilities are directly responsible for opening a special bank account to receive loans from the WRDF and must have proper accounting systems in line with government policies and procedures. (You learned about the WRDF in Study Session 9.) They also collect and aggregate required financial data and report regularly to the WRDF. Like the federal WASH sector ministries, the WRDF is responsible for reporting to MoFED on all financial matters with respect to towns financed through loans under the Programme.
Grant financing
The grant component for urban WASH projects may be transferred in two possible ways. One option is from BoFED to the town’s Finance and Economic Development office (ToFED). The other is for the region or zone to control funds on behalf of the town, which may be the case if the town does not have the capacity to do this for themselves. If small towns recognise that they lack capacity to implement the WASH fund, they can assign the regional or zonal WASH bureaus to take on this role. They will request BoFED to transfer the grant amount to the regional or zonal water sector institution to implement their activities.
Any grant transferred from BoFED to the ToFED office is disaggregated into water supply and sanitation components based on the approved budget. The grant for water supply improvement is transferred to the water utility, if there is one. Other WASH components (sanitation and hygiene) are managed by the Town Finance and Economic Development office.
12.4.3 Financial management at woreda level