Guidelines For Project Planning, Monitoring and Reporting 26.5.2000

Ministry for Foreign Affairs of Finland
Division for Eastern Europe and Central Asia

Unit for Cooperation with Neighbouring Areas
in North-West Russia and the Baltic Countries
GUIDELINES
FOR PROJECT PLANNING, MONITORING AND REPORTING
26.5.2000
FTP International Oy
Finnconsult Oy
Guidelines for Project Planning, Monitoring and Reporting
CHAPTER 1. INTRODUCTION ..............................................................................................................................2

1.1 BACKGROUND 2
1.2 PURPOSE OF THE GUIDELINE 3
CHAPTER 2: APPROACH AND KEY PRINCIPLES.............................................................................................5
2.1 PROCESS OF PROJECT DESIGN AND PLANNING 5
2.2 SUSTAINABILITY FACTORS 6
2.3 PROJECT CONCEPT 9
CHAPTER 3. SITUATION ANALYSIS ................................................................................................................12
3.1 BACKGROUND STUDIES 12
3.2 STAKEHOLDER ANALYSIS AND RESOURCE ASSESSMENT.....................................................................................13
3.3 PROBLEM ANALYSIS 14
3.4 OPPORTUNITY ANALYSIS 16
CHAPTER 4: DESIGN OF PROJECT STRATEGY AND SETTING OF OBJECTIVES ...................................18
4.1 SELECTION OF PROJECT STRATEGY 18
4.2 FORMULATION OF OBJECTIVES 19
4.3 DESIGN OF THE MONITORING SYSTEM 22
CHAPTER 5: PLANNING OF IMPLEMENTATION...........................................................................................24
5.1 IMPLEMENTATION SCHEDULE 24
5.2 RESOURCES 26
5.3 BUDGETING 26
TABLE: FORMAT FOR BUDGET ........................................................................................................................27
CHAPTER 6: RISK ASSESSMENT AND KEY ASSUMPTIONS ........................................................................30
CHAPTER 7: PROJECT ORGANISATION .........................................................................................................31
CHAPTER 8: MONITORING AND REPORTING ...............................................................................................32
CHAPTER 9: GUIDELINES FOR PROJECT MANAGEMENT AND IMPLEMENTATION ...........................33

9.1 WORK PLANNING 33
9.2 MONITORING AND REPORTING 34
9.3 REPORTING REQUIREMENTS 36
9.4 INVOICING 40
ANNEX 1: PROJECT CYCLE MANAGEMENT (PCM)......................................................................................42
ANNEX 2: LIST OF APPROPRIATE PCM MANUALS AND GUIDELINES....................................................47
ANNEX 3: BUDGET ...............................................................................................................................................48
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CHAPTER 1. Introduction
1.1 Background
Since the early 1990s Finland has supported in political and economic reform
process in Central and Eastern Europe. The main instrument of Finnish support
has been Finnish Bilateral Co-operation Programme with Neighbouring Areas
in North-West Russia and the Baltic Countries. Bilateral co-operation is an
important element of Finnish foreign policy. The aim is to help the transition
countries build market-economies and democratic societies. In addition
bilateral support is developing new co-operation modes and networks between
Finnish and partner country institutions.
The principles and objectives of the Finnish bilateral co-operation programme

are defined in the co-operation strategy prepared by the Ministry for Foreign
Affairs of Finland. In general, co-operation supports the objectives of the
European Union’s policies on the Northern Dimension. The following areas
and objectives are highlighted in the strategy:
• Strengthening bilateral contacts with partner countries and the promotion of

general security.
• Strengthening market economics, democracy and good governance in
partner countries and institutions through supporting legislative and
administrative reform and infrastructure development.
• Reduce environmental risks and risks related to organised crime and
hazardous diseases through infrastructure development, legislative reform
and risk monitoring.
• Promotion of economic and industrial co-operation with Finnish
technology and know-how.
• Encouraging citizen-level co-operation between Finnish and partner
countries’non-governmental organisations.
Due to different circumstances in the Russian Federation and the Baltic

countries specific objectives and focus areas of the co-operation vary in the
following way:
§ In the Russian Federation Finland supports processes which strengthen the
integration of Russia into the European partnership processes. Specifically,
Finland supports actions which decrease environmental and nuclear threats,
lower barriers to co-operation in the energy, forestry, and traffic sectors and
that strengthen rural food security and social and health services.
§ In the Baltic countries Finland supports reform processes related to EU
accession. In addition, Finland supports actions that decrease
environmental risks and improve general security.
Finnish bilateral co-operation strives to co-ordinate with other international co-

operation programmes, and favours co-financing arrangements.
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Finnish financial support is channelled through several instruments including:

bilateral co-operation projects, co-financing of multilateral projects, twinning
between administrative bodies, projects implemented by non-governmental
organisations, and small-project funds managed by the Finnish delegations.
This guideline highlights the planning and management procedures to be
applied in bilateral projects. In addition to this guideline, a separate guideline
on the administrative procedures has been published for the Finnish ministries
and authorities (in Finnish language).
In Finland, the Ministry for Foreign Affairs is responsible for the overall co-
ordination, monitoring and funding of the bilateral co-operation. Finnish sector
ministries and the Finnish Institute of Nuclear Safety are responsible for the
planning and implementation of specific co-operation projects. Project
implementation is carried out by various agencies, including consulting
companies, universities, research institutions and extension organisations.
1.2 Purpose of the guideline
The guideline is intended to assist and support the Finnish and partner country
actors in designing and preparing better quality projects and programmes, and
in assessing project proposals in order to harmonise the various management
systems among the Finnish ministries into a smoothly functioning and
transparent management system.
The guideline aims at supporting the project designers - Finnish authorities,

consultants contracted for planning, or Finnish companies, organisations,
institutions etc. designing projects and applying for funds of the Programme –
to prepare project plans that lead to relevant, sustainable and successful project
implementation. In addition, the guideline also provides project implementers
with support in project management, reporting and administration related
issues.
Bilateral projects are categorised in small projects and large projects.
Project is a small one when

• its annual budget is less than 100.000 EURO; or
• its total budget does not exceed 300.000 EURO.
A large project has

• an annual budget higher than 100.000 EURO; or
• a total budget higher than 300.000 EURO.
The contents of all bilateral project and programme plans should follow the
criteria presented in these guidelines. It is however, strongly emphasised that
preparation procedures should reflect the scope of the project. The proposals
might vary a lot in length and level of detail, depending on the duration and
scope of the project. In case of small projects the profoundness of proposals
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and plans is not excepted to be at the same level as it is in case of large and
complex projects or programmes.
The format for presenting the plan is free as far as the given structure is
followed. The same applies to reporting: the content requirements are defined
and an example reporting format is included in the guidelines. The format can
be utilised, but it is not obligatory. The authors wish to clarify that the
proposed planning methods are fully applicable at both project and programme
levels. Furthermore, the same methods can also be applied as assessment tools.
How to use these guidelines
The guideline has been prepared following the same logic and phases along
which the preparatory work and design of a new project should proceed. It is
structured into three major parts. The first part deals with key principles and
strategies outlining the Finnish Bilateral Co-operation Programme with
Neighbouring Areas in North-West Russia and the Baltic Countries. The
second part describes the requirements set for project proposals and the last
major part of the guideline covers project administration and management tasks
during the actual implementation.
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CHAPTER 2: APPROACH AND KEY PRINCIPLES
2.1 Process of project design and planning
There are three main principles for project work laid down and widely
emphasised by the international donor community:
• Problem based approach: projects are addressing real needs and problems
• Stakeholder orientation: co-operation with the local beneficiaries and
stakeholders from early preparation and planning phases
• Objective oriented approach: focus on desired improvements and
achievements during the planning and implementation
This approach is presented in the figure below.
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IM PACT AND RISK ASSESSMENT
PROJECT PLAN
The planning process starts with collection of basic background information

and identification of the key stakeholders and their relationships with the
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project idea. When relevant background studies have been made, the actual
planning process starts with identifying and analysing the interests and roles of
the project’s stakeholders. Problems and needs of the stakeholders are then
identified and assessed through problem analysis. Also the opportunities and
applicable resources and existing strengths should be assessed.
The planning process may then proceed through combining the prioritised
problems and needs with the available resources and opportunities in the
project environment. The tentative plan should then be assessed through impact
and risk assessment, and revised as needed.
Best results in planning are achieved when the planning is based on true
participation of key stakeholders while the process is facilitated and the plan
formulated with professional support. The actual beneficiaries and other key
stakeholders should be able to influence the planning process at least when the
scope of the project has been selected and decisions taken. Only thereby it is
possible to ensure that the project is based on prioritised needs and problems,
and builds on the available and existing potentials and resources of the
stakeholders. Participation is also a pre-requisite for strong commitment, which
is required in order to ensure the longer-term sustainability of the results.
For example, the situation analysis may be organised in a form of a

participatory planning workshop where all key stakeholders are involved. The
workshop may result into a draft overall project plan defining the scope,
approach and main elements of the project. In addition, the roles of different
parties may be agreed upon. Also the required resources may be roughly
identified. Wide informing and commenting are also essential in creating a
solid participatory approach.
The phases of the planning process are described in more detail in the
following chapters. However, as several different methods might be used in the
different stages of the pre-project situation analysis, this guideline does not aim
to provide all the necessary methodological guidance for specific analyses.
Instead, several appropriate international and Finnish guidelines are available.
This guideline focuses on describing the recommended approach at a general
level whereas detailed methodological guidance may be obtained from the
manuals listed in the Annex 2.
Planning should be teamwork between the Finnish and partner country experts.
In addition, in order to avoid one-sided views, the planning team should be
multi-disciplinary and cover the specific substance areas as well as the
economic/financial, institutional, technical, socio-cultural and environmental
aspects relevant to the project idea.
2.2 Sustainability factors
Sustainability is one of the most important guiding principles that should be

tested and cross-checked during the project preparation. Usually, projects aim
6
at sustainable results and impacts. This means that improved systems and
actions should not remain dependent on external support after the project has
been phased out. The foundation for sustainability is established already during
the planning phase. Mistakes made during the planning process are hard, often
even impossible, to repair. Instead, they tend to duplicate during the
implementation process.
Sustainability includes several critical dimensions. The project planner should

collect sufficient information on the local conditions – policies and strategies,
institutional framework and capacities, financial resources, technology, social
and cultural factors, and environmental factors - already during the preparation
and planning phases. Risks related to sustainability can be found in all projects;
depending on the scope and duration the critical factors might vary.
Sustainability factors indicate more or less what will happen with the project
delivered services after the project completion when external resources are not
available anymore. Therefore, all elements – objectives, activities, resources,
project organisation, time-schedule - of the plan should be assessed in
accordance with the requirements set by sustainable long-term operation. The
different elements need to be in balance with each other. For example, the
intended level of extension services should not exceed the realistically assessed
long-term financing potential, or the planned level of infrastructure the
financial and operational capacity of the local partner organisation.
The checklist presented below may be used when assessing the risks related to
the sustainability of the project. This list is only indicative and should be taken
as a general guideline in testing the future development prospects of the
planned project.
Factor Checklist
Institutional • Is the share of responsibilities between various organisations and groups
arrangements clear, extensive and unambiguous?
• Has the participation of various stakeholders in planning, decision
(stakeholder
making and implementation been ensured?
resources)
• Are the proposed solutions applicable in terms of the interests,
capabilities and capacities of stakeholders?
• Institutional support from the project partners (e.g. availability of
resources, personnel and facilities, funding)
• Commitment of partners involved in the project
• Is the planned management model efficient and motivating enough?
• Project structure, is it embedded in the local institution?
• Managerial capacities of the key partner
Political • Is the project in line with the partner country’s policies?
factors
• Correspondence with national, regional and local reform strategies and
programmes and priorities?
• Are the actions relevant in relation to the partner country’s legislation
and rules?
• Budgetary support existing or foreseen for the project results
• Support from other relevant co-operation partners (business & public)
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• Are the policies realistic and sound?
Economic and • What are the expected long-term operation, maintenance and
financial management costs, how and by whom will they be covered?
factors • Have the possibilities on income generation and cost sharing been
identified and utilised?
• Prospects for budgetary subsidies
• Cost-efficiency analysis
• What is the beneficiaries’real willingness and capacity to pay?
Social and • Does the planned approach guarantee proper participation of different
cultural factors stakeholders, especially of those belonging to the most vulnerable
groups?
• Do the stakeholders accept the proposed approaches socially and
culturally?
• Is information on the project planned adequately?
• Are the language and concepts used in information, training and other
activities understandable to all?
• Have the needs of the most vulnerable groups been taken into account?
• Do the planned actions support social equity between stakeholder
groups?
• Correspondence with rights of minority groups (language, religion,
nationality etc.)
• Differentiated expectations and roles and possibilities of rural and
urban population
Environmental • What are the foreseen short-term environmental impacts of the
factors implementation phase, how will they be taken into account?
• Impacts of technological solutions provided by the project?
• What long-term environmental impacts are foreseen, how the negative
impacts will be prevented?
• Does the project involve possibilities to enhance environmental
conditions? How?
• Is the project enhancing environmental protection (locally, regionally,
globally)
• Environmental risk analysis
Technology • Have the possibilities provided by local technologies been analysed, is
foreign procuring really justified?
• Is the proposed technology solving the problems?
• Is the approach relevant in relation to the technical skills and capabilities
of the stakeholders? Training needs?
• Were local partners, intended direct beneficiaries involved in the
selection of the technology?
• Are there support services (spare parts, tools, etc.) provided locally?
• Have alternative more cost-efficient solutions been appropriately
analysed?
• Financial resources to maintain the technology?
• What kind of preventive maintenance systems are needed in order to
ensure adequate long-term operation and maintenance?
• Are the roles and responsibilities of different stakeholders in operation
and maintenance clearly specified?
• Is it possible to duplicate and augment the solutions for wider impact?
• Do the solutions provide basis for local production?
Gender issues • In which issues the different roles of men and women, boys and girls,
elder women and young women, rural men and urban men, etc. in the
project may have an impact?
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• How the different roles have been taken into account, does the project
support gender equity?
• Project´s effects on the social relations between different roles
2.3 Project concept
A project is a clearly scheduled group of actions that are carried out to attain
specific objectives and is implemented by an organisation established or
appointed particularly for it, utilising for this project specified resources.
Thereby, each project has to have clearly defined objectives. They describe the
desired improvements the project aims at achieving. Even though a
development project usually aims at long-term improvements, e.g. more
efficient administration, a project as such is always temporary and limited.
In addition to the objectives, the project plan should specify the project
organisation, time-schedule, and resources required for successful
implementation of the project.
A good project plan fulfils the following requirements:
The objectives are clearly and realistically stated and they reflect, from the
point of view of the beneficiaries, the desired improvement the project aims at
creating. For example, in an education project the objective may be improved
learning results, or in an environmental project improved sustainability of the
use of natural resources. Training or preparation of a forestry master plan are,
on the other hand, not objectives but activities to be carried out to achieve the
objectives. The objectives should be stated in such detail that the main results,
resources and implementation approach may be derived from them. Specific
and measurable indicators are attached for each objective in order to enable
quantitative and qualitative monitoring of the project.
The time-schedule of the project is clear and realistic and covers its whole
lifetime. Sustainable results must be reachable within the project’s planned
lifetime; it must be possible to phase out the project in such a manner that the
respective local organisations are able to take over the improved systems and
continue the operations without further external support.
The project has a clear and efficient management structure and

organisation. The roles and responsibilities of different parties are clear and
they are based on true co-operation and participation. The monitoring and
reporting system should enable effective project management and incorporate
feedback to work planning.
The resources are specified and sufficient in relation to the objectives and
expected outcomes. Resources are usually divided into human resources,
materials, equipment, and various services. Based on these the budget can be
prepared. If financing is coming from several sources, it is also essential that
the roles and responsibilities of co-financiers are defined; will the Finnish
9
sector ministry finance a certain equipment or will the local counterpart be

responsible for providing it?
The presentation of a project plan may vary a lot in length and profoundness,
depending on the duration and scope of the project. As a basic rule, the bigger
and more important the project, the more that can be expected from the
preparation and from the project plan. The structure and contents of a plan is
presented in the next page.
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Contents of a project plan:
1. Summary
2. Background
• Description of the pre-project situation
• Links to financiers’strategies and to local reform processes and development
policies
3. Stakeholders
• Final beneficiaries
• Direct beneficiaries
• Other stakeholder groups and their roles
4. Objectives and their verification

• Overall Objectives and their monitoring
• Project Purpose and its monitoring
• Results that the project is going to deliver, broken down by project components
5. Implementation schedule
• Description of the implementation
• Approach and methods
• Major activities and an tentative time schedule
6. Resources
• Personnel, work time, procurement, etc.
7. Budget
• Breakdown of overall costs
• Financing plan by different financing sources
8. Risk assessment and key assumptions

• Sustainability factors
9. Project organisation
• Co-operation partners and their roles
• Steering Group
10. Monitoring, reporting and evaluation

• Reporting cycle
• Indicative plan for Project evaluation
Appendices
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CHAPTER 3. Situation analysis
3.1 Background studies
Some background studies are needed in all projects in order to be able to make
adequate situation analysis. Therefore, it is advisable to start the preparations
already several months before the date of submission of the financing
application.
Situation analysis should clarify and give an overall view on the problematic
environment and justify the project idea. Situation analysis also describes the
roles, views and interests of different stakeholders. Sufficient background
studies should ensure that the project is based on adequate information, is
relevant and realistic, and fits well to its environment. Factors essential for
sustainability should also be identified in the background studies.
Depending on the project, one may need e.g. the following background
information:
Political factors; national and regional policies and strategies, political

decision-makers and decision making mechanisms; local reform policies and
strategies, legislation and regulations relevant to the project, etc.
Institutional factors; responsible administrative organisations and their roles,

institutional structure and staff, institutional reform strategies and programmes,
other programmes and projects, etc.
Economic and financial resources and factors; government and municipal

financing, affordability and willingness to pay, financial planning and
management systems, cost-recovery systems, etc.
Infrastructure and technology; technology and technical systems applied in

the country and at project site, availability of raw materials, transport, water
and energy supply, waste management, etc.
Social and cultural conditions; existence of different kind of stakeholders and

social groups, gender roles and their impact, language, social groups, impact of
values and attitudes, etc.
Environmental factors; natural resources, environmental conditions,

environmental threats, etc.
When the planning process is initiated, one should systematically define and
plan the necessary background studies as otherwise they are easily neglected or
remain insufficient. The need and extent of background studies has to be
agreed upon with the local partner organisation. Often it can carry out the
studies, based on the jointly agreed plan.
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3.2 Stakeholder analysis and resource assessment
Any individuals, groups of people, organisations or companies that will have a

relationship with the project are defined as stakeholders. It is important to
realise that this relationship can be either positive or negative. In some
manuals, stakeholders are divided into target groups, direct beneficiaries and
final beneficiaries. However, this kind of categorisation is not very often
visible at this analysis phase. When the design and planning proceeds it
becomes possible to define the different actors into more specific categories
according to their roles and the time scale of their possibilities to benefit from
the project results.
How do we analyse the stakeholders?
1. Start with identifying the various players who:

a) might be affected by the project; or
b) might affect the project; or
c) might become useful project partners even though the project may also
be implemented without their contribution; or
d) might become conflict partners as they may face the project as a threat
for their role and interests; or
e) will anyway be involved in the project.
2. Categorise them according to their role: is the stakeholder group
(organisation, group of people, etc.) supposed to work in the project, co-
finance it, benefit from the services and products that will be produced by
the project? Is it a supporting organisation? Does it have a controlling
function, etc.?
3. Characterise the players, identify their interests and expectations in the
project and analyse the links and relationships between the various
stakeholder groups.
4. Assess the resources and capacities of the stakeholders: what are the
existing strengths and potential contributions on which the project could be
build up?
5. Draw consequences and conclusions of the stakeholder analysis and make
recommendations for the project.
Stakeholder analysis provides the project designer with information on all the
stakeholder groups. In an ideal case the project is designed in a participatory
planning workshop following the steps presented in these guidelines. If that
approach is not possible, a participatory planning workshop should be
organised where the aim is to verify the results of any planning carried out by
outsiders.
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Stakeholder analysis and resource assessment - key function and

outcomes:
The project designer has a clear view on the following issues, which pave
the way for a good planning process.
è Different stakeholder groups and their roles

è Resources and strengths of the stakeholder groups
3.3 Problem analysis
Problem analysis goes hand in hand with stakeholder analysis. It is not possible
to ensure the relevance of a project, whether the project is addressing real
needs and problems, if it is not known with whose problems the project is
dealing. Problem analysis aims at clarifying the overall picture of the current
situation and identifying the key problems and needs in the project
environment. On the other hand, it also serves as a method of prioritising the
needs.
One of the most typical problems in project planning is that solutions are not
developed on the basis of the actual problems, but through preparing a plan for
a pre-fixed solution. Engineers tend to plan technical solutions, training
planners propose training plans to the same situation. The aim of problem
analysis is to find out real problems and their causes, and thereby lay down the
basis for the project strategy selection. Solid project preparation starts with
asking why a project is needed and who needs it.
Depending on from whose point of view problems are looked upon, they tend
to vary. The needs, interests and opinions of various groups differ from each
other and are often even conflicting. Therefore, it is important that the
problems are assessed from the individual perspectives of key stakeholders.
Ideally, this is done through a participatory process where the stakeholders
identify their key problems and the project designer’s role is more to facilitate
the group work. Brainstorming and free association sessions are good
techniques for the identification of problems.
How do we analyse problems?
1. Define the main stakeholder groups from whose point of view the problems
should be looked upon and divide them e.g. into the following levels:
• Final beneficiaries (“end users”, “customers”); for example in a health care

project the population in the area, or more specifically, disabled persons or
e.g. sexually active youth divided by gender and age groups.
Correspondingly, the consumers may be regarded as a final beneficiaries in
an agricultural project.
• Producers of services etc.; health care organisation and its personnel in a
health project, farmers in an agricultural development project.
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• Possible levels of processing, trade and training/education; e.g. medical

school, agricultural extension service, processing factory, marketing
organisation.
• Regional actors; e.g. a municipality, district, region, etc.
• Sectoral and national actors; health sector in general, respective ministry,
etc.
2. When the viewpoints are identified study in more detail the problems. The
assessment may cover the following problem dimensions:
Economic and financial factors

• costs, cost efficiency and financial resources
• capability and willingness to pay
• reliability and efficiency of financial management
• other economic and financial problems
Institutional factors
• co-operation of different parties, their roles and responsibilities
• skills and knowledge of personnel
• information flows, reliability, timeliness and quality of information
• problems caused by legislation and regulations
• efficiency and transparency of management
• other problems related to institutional arrangements, governance and
management
Technology
• level and quality of planning
• level, sufficiency and quality of facilities, equipment and materials
• problems related to infrastructure (e.g. water supply, roads, energy)
• level of operation and maintenance
Social and cultural factors

• roles and participation of different stakeholders
• problems related to gender roles
• problems related to culture, values, attitudes and language
Environmental factors
• waste management
• sustainability of the use of natural resources
• environmental risks
• impact of environmental conditions, risk of natural disasters
The problems are always unique to a project. Therefore, problem analysis

made for another similar type of project may not be copied to a new situation.
Depending on the case, also other problem dimensions may need to be studied.
Altogether problem analysis is carried out in order to find answers to the

following questions:
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• What internal factors create problems or obstacles for the issue in concern?
• What obstacles are caused by the operational environment?
• What factors may become obstacles in the future development?
In practice, problem analysis may take some effort and time. Therefore, it is
important to remember that the outcome of the analysis depends on the
participating persons and their social standing, education, gender and so on,
and on the cultural characteristics that were involved in the task.
Several methods may be applied in problem analysis. For example, SWOT

analysis, problem matrix, problem tree and mind mapping methods are all
applicable. Further guidance may be obtained from the manuals listed in the
Annex 2.
Problem analysis clarifies to all parties involved:
è Major elements and their interconnections in the existing problem

situation.
3.4 Opportunity analysis
The possibilities and potential synergies with other completed, ongoing or

coming reform programmes and projects should also be identified, as well as
the opportunities provided by the project environment and future trends.
Opportunity analysis is important in creating awareness of the action taken by
other actors and it may help in guiding the project designer from planning
projects overlapping with something already existing in the area or respective
sector. Systematic opportunity analysis also enables the assessment of the
potentials provided by new development opportunities as well as ensures that
the project plan is in line with the reform strategies and national and regional
policies of the partner country.
How do we proceed?
1. Identify and review the completed and ongoing projects and programmes in
the sector / area
2. Check the national and regional strategies and policies and assess the
opportunities they provide
3. Identify from local authorities what kind of new action is under preparation
4. Contact potential co-operation partners and inform them of your plans
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Opportunity analysis provides information and knowledge on:
è Potential synergies with other parties in the region / sector.
All in all, situation analysis is a tool to ensure that the project will address real
needs and problems. It is a tool to ensure the relevance of the project from the
stakeholders´ viewpoint.
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CHAPTER 4: Design of Project Strategy and Setting of Objectives
4.1 Selection of project strategy
The planning should continue by defining which problems, needs or

opportunities the project is going to address. The situation analysis
provides the information needed in selecting the project strategy (the scope
of the project).
In order to ensure the relevance of the strategy and the commitment of the
main stakeholders, the selection should be made together with the key
stakeholder groups.
How do we analyse strategy options?
1. Start with prioritising problems in accordance with their impact and

severity and possibility to improve the problematic situation
2. Group the priority development areas from the prioritised problems into
potential clusters
3. Review identified resources and opportunities
4. Assess alternative strategies for your project
5. Select the optimum strategy (based on the priorities, potential resources and
synergies).
When assessing the alternative strategies it is important to cooperate with the

local partners and stakeholders in order to get them to feel ownership for the
project. The priorities might also vary among different stakeholder groups.
Therefore, it is necessary to agree on the criteria on which the strategy
selection will be based. The alternative strategies can be assessed, for example,
with the following criteria:
• political support,
• economic and financial sustainability,
• socio-cultural acceptability,
• priorities, expectations and interests of stakeholders,
• resources available at local institutions,
• funds available from the donor,
• technological appropriateness,
• environmental impacts,
• urgency.
Strategy selection implies which objectives are included in the project, what
the project aims at delivering or contributing to, which objectives are left out
and what the project cannot or does not want to pursue. It is better to agree not
to agree and forget the project rather than implement it against the wishes of
major stakeholders.
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When the strategy line is selected it is time to proceed to designing the project
content.
As an outcome of the strategy selection the project planner knows which

issues and elements will be included and tackled in the project. The
project framework is defined.
4.2 Formulation of objectives
The previous planning phases have so far mainly consisted of preparing the
project’s framework by analysing the existing pre-project situation. The project
designer has gathered background information and outlined the project
framework in close co-operation with the local stakeholder groups.
The project idea has been further developed and by this phase all the key actors
should be aware of the selected project strategy. The first element in the more
detailed project design deals with objectives of the project.
Figure 2
HHieier raar rcchhyy oof f OObbjejecctiv

tiveess
OVERALL
TIME O B J E C T IV E S
PROJECT
PURPOSE
RESULTS
PRESENT DESIRED
CT
SITUATION S ITUATION
E
OJ
PR
19
The objectives are set in a hierarchy of three levels which supports the key
principle of an objective oriented approach (see Figure 2 above). The objective
oriented approach aims at creating a wider scope and a longer time-perspective
than the planned project can cover. It implies that the project designer should
look at the consequences and impacts of the intended project already when
planning it and keep in mind that a project is never an isolated entity. The focus
is particularly on future sustainability factors.
The hierarchy of objectives is defined by starting from the overall objective

and the project purpose. The overall objective is the highest level objective
describing a future situation towards which the particular project is intended to
contribute. The most common mistake in defining the overall objective is to set
it in a too wide or general way. A very general overall objective is problematic
particularly because it does not provide the project management with any
support or guidance during implementation, as to whether the project is on the
right track or not.
The overall objective should be set on such a level that, at the latest towards the
end of the project, it is possible to verify that foreseen changes, improvements
or developments are taking place and that the desired situation is closer than it
was when the project started. This might be verified by certain factors
signalling change towards the desired improvement.
The overall objective is usually defined at the level of regional or sectoral

policies and it reflects project´s desired impact at the level of final
beneficiaries. It is beyond the life time of this very project, further in the future
and thus other development efforts and initiatives affect the achievement of the
overall objective. However, it should be defined at such a concrete level that
the project has a significant impact in reaching it.
The project purpose describes what the project aims to achieve by the time it
ends. Setting the project purpose also requires defining the duration of the
project. The project purpose should define the benefits that direct beneficiaries
accrue as a result of utilising the services and products delivered by the project.
The project management team is responsible for the achievement of the project
purpose, although it is, in effect, out of its direct control since it is not possible,
or desirable, to control the beneficiaries’ behaviour. Project beneficiaries need
to become active themselves and to start using the project results in order for
the project purpose to be achieved.
The lowest level objectives are the results. Results describe the concrete
services and products that the project is going to produce and deliver to the
direct stakeholder groups. Project management is in charge of delivering the
results and this is more or less in direct control of the project team. In order to
ensure the achievement of the project purpose, the project management team is
responsible for providing services that are preferred and prioritised by the
direct beneficiaries.
20
Results are sequenced and they should be achievable already while the project
is proceeding. Using results, it is therefore easy to define milestones which
support and guide project management.
The different levels of objectives are not only separated by the time-scale by
which they are expected to be achieved, but also according to the stakeholder
groups that are intended to benefit from the project. Generally, the stakeholder
groups can be divided into two major categories: direct beneficiaries and final
beneficiaries ( Figure 3.). When defining the objectives of the project, the
project planner must also work out who are the various stakeholder groups/
beneficiaries that are intended to benefit from the project services.
Figure 3
Project Beneficiaries
FINAL
BENEFICIARIES
e.g. Farmers
DIRECT
BENEFICIARIES
e.g.
Extensionists
PROJECT SUPPORT
Direct beneficiaries are individuals, groups and institutions that are directly
working with the project and thus benefiting from the results. Direct
stakeholders have often been, and in many manuals are still called, “target
groups”. They can be seen as direct beneficiaries as well.
21
Final beneficiaries are people or groups who will benefit in the longer run
from the project through improved services, better products, etc. These will be
made available to them by the direct beneficiaries.
Project design specifies the desired and intended benefits and

achievements, the objectives that are set for this very project. The project
planner has a clear idea where the project is aiming at; what kind of
improvements should be in place when the project will be completed
4.3 Design of the monitoring system
A monitoring system indicates to those working in the project which factors

and issues actually verify that the project is being successfully implemented.
The monitoring system is in fact the key management tool of the project
implementation. Therefore, a monitoring system needs to be set up from the
very beginning of the project in order to enable the project team to:
• be aware of how well the project is doing and how well it is bringing about
the changes expected; and
• improve and redirect project implementation or to take corrective measures
as needed in order to bring a project fully onto the right track.
A good monitoring system also enable all the parties involved in the project to
create a joint perception of the objectives. The verification of achievements and
successes requires objective specific factors which at the same time also clarify
and further specify the objectives.
Commonly used list of key characteristics of these factors (indicators) includes

quality, quantity, beneficiary, place and time. Especially qualitative indicators
should be specified for each objective. Indicators are concrete factors that
enable to follow-up and verify the change occurred. A good indicator fulfils the
following basic requirements:
• it is sensitive to change; changes should be seen or foreseen at reasonably

early stages of the project. Otherwise, corrective measures cannot be made
and without revising the project´s strategy the desired improvement may
not be met.
• it is reliable; verifies effects and impacts of the action taken by the project
instead of reflecting changes due to external factors and processes. The
follow-up of indicators should lay down a justified and solid basis for either
continuing in accordance with the original plans or making revisions to
them.
• it is reasonably easy available; in case the monitoring requires extensive
time and human resources the indicator is often ignored.
22
A good monitoring system focuses on all three levels of objectives. At the level
of overall objective the monitoring should provide information on benefits
accrued to the wider society or community, changes in behaviour. The most
important aspects for the project implementers are the results and project
purpose, against which their work can be evaluated. The monitoring should
provide information on “have the right things been done in the right way”, e.g.
on whether it is justified to continue with the original plans, or are changes
needed.
Thereby, with the monitoring activities the project implementers assess how
well the project objectives are being achieved. Monitoring follows issues and
factors verifying that the intended objectives have really been reached due to
this project. This verification of project achievements serves the information
needs on the financiers side but also informs the wider public on how
taxpayers’money has been used.
When setting up a monitoring system it is important to keep in mind that the

follow-up activities are carried out by those actually implementing the project.
Monitoring is thus one part of the routine management tasks, a kind of critical
self-assessment and quality control. Resources are always limited and this fact
also limits the possibilities for gathering and analysing a lot of information. So,
when designing the monitoring system, the project planner should also identify
where the information can be found and at what cost, and take into account
necessary resources when planning the implementation of the project.
The monitoring system should be objective-specific. The issues to be followed

and verification of the achievement of respective objectives should be
independent of others, relevant (telling about the achievement they are
supposed to indicate), valid and available at the time appropriate for further
planning.
The monitoring system will be further specified during implementation in order

to respond to the management needs and the rapidly changing project
environment.
In practice the monitoring system is further describing and specifying the

objectives of the project. Thus the design of a monitoring system
identifies stakeholder interest and creates a joint perception of objectives
among stakeholders involved. It also lays down a basis for reporting and
work planning.
23
CHAPTER 5: Planning of Implementation
5.1 Implementation schedule
The logic of planning starts from identifying the stakeholders and their key
problems. These problems are transformed into a desired improved future
situation and the project strategy and approach are selected. From the analysis
phase the work continues with designing the project intervention logic, which
starts with setting the project objectives.
When the objectives are clearly set the project planner proceeds to analyse
what needs to be done in order to achieve the results and the project purpose;
i.e. prepares an implementation plan for the project. This concrete action plan
is defined through activities and it comprises the main tasks and work that it is
necessary to undertake in order to achieve the planned results. The main
activities must be sequenced and roughly scheduled in the overall plan. When
they have been defined, the project logic can be tested.
Figure 4
Project Logic
PROBLEMS
WHY and BY WHOM BENEFICIARIES
is the project needed ?
RESOURCE ASSESSMENT
OVERALL OBJECTIVE
WHAT IMPROVED SITUATION PROJECT PURPOSE
will the project bring about ? (INDICATORS)
(HOW TO MEASURE RESULTS
the improvement ?) (INDICATORS)
HOW will the results

be achieved ? ACTIVITIES
(WHAT TO DO?)
WHAT RESOURCES RESOURCES

are needed ?
PLANNING IMPLEMENTATION
24
It is highly recommended that testing and checking of the logic of the project
strategy is done both by the project planners as well as by “a fresh pair of
eyes”, by someone not involved in the design and planning activities. A simple
way to test the logic as a desk study is to question the different steps in the
following way:
Algorithm for testing the project logic
If the said activities are undertaken and the assumptions are met is it possible to
bring about the planned results? Does it seem realistic that the set results can be
achieved?
If the results are reached, is it feasible that stakeholders start utilising them? Is
it feasible that the stakeholder response leads to the achievement of the project
purpose and that the assumptions hold true within the given timeframe?
If the project purpose is achieved, is it possible to indicate and find signals

verifying that the project purpose is leading towards the achievement of the
overall objectives? Furthermore, is it possible to do this with the respective
assumptions holding true?
If any of the answers were “no”, the project logic is somehow inconsistent and
needs to be revised.
If activities were not enough to produce the intended results, they should
be revised: activities might be modified, new activities might be
introduced or some activities might be removed.
If the stakeholders do not seem to benefit from the services and products
delivered by the project, then results need to be modified so that they
reflect the prioritised needs and motivation of the intended beneficiaries.
If the stakeholder response does not seem sufficient to achieve the

project purpose, then either the project purpose needs to be revised or
new results added.
If it is difficult to predict the link between the project purpose and the
overall objective, it is most probable that the overall objective is too
generic and vaguely defined. However, it should be possible to identify
at least some signals indicating that, thanks to this project, there has been
some movement towards that longer term, higher level desired situation.
If this is not the case, the overall objective should be revised.
25
When the project planner has ensured that the project’s internal logic is
consistent, we should also screen the sustainability factors and beware that
planned project is based on a solid, sustainable basis.
The next element in the project plan, resources, should be defined only after
having ensured that the project logic is consistent.
5.2 Resources
Project resources are the human and material inputs, time and funds needed to
undertake the planned activities and to manage the project. They can be
defined when the activities are worked out at a sufficient level, when it is
possible to specify how much and what kind of skills, knowledge and
experience as well as materials, equipment and services are requested to carry
out the planned activities. Other costs related to work, such as travelling and
accommodation needs to be specified, too.
When the resources needed have been identified, it is of utmost importance to

clarify the overall project financing plan and to specify financing shares of the
co-operation partners. Type and nature of commitments or contracts needed
with local partners and with other co-financing partners, as well as what is
applied from the Finnish bilateral funds are also clarified.
Resources are briefly described in the project plan and further elaborated in the
budget that is attached to the project proposal.
Resources describe what is needed to implement the project.
5.3 Budgeting
When preparing the project plan, a tentative budget should be drawn for the
whole duration of the project, even though, the indicative financing decision of
the Finnish Ministry for Foreign Affairs cannot extend beyond four (4) years.
The detailed budgets are then adjusted annually.
The budgeting currency will be Finnish Marks (FIM) as long as it is a valid

currency in Finland and thereafter the budgeting currency will be EURO.
The core principle that concerns all payments is that costs are covered against
actual expenses and that the responsible project implementation organisation
must have proof for costs accrued whenever so requested by the financing
26
authority. Original receipts or other supporting documents or their copies are

always requested on certain cost items, which are further described below.
The overall budget consists of five major categories. The main cost categories
are divided according to cost items and the rules concerning the payments
might differ respectively.
A budget format is presented in the table below. This format indicates the most
common items; budget lines should be added according to project specific
needs. A more detailed budget format and instructions are enclosed as Annex
3.
Table: Format for budget
BUDGET BREAKDOWN
Expenses allocated by financing sources
or by countries
Categories Unit No of units Unit cost TOTAL COSTS MfFA Local funds Others
A. Personnel costs
A.1 Finnish salary based staff 0
A.2 Consultancy fees 0
A.3 Local staff 0
A.4 Administrative staff 0
0
A.5 Per diems 0
A.6 Travel expenses
A. Total Personnel costs 0
B. Training events
B.1 Workshops lump sum
B. Total training costs 0
C. Procurement
C. Total Procurement costs 0
D. Administration
D.1 Office costs lump sum
D.3 Evaluation lump sum
D. Total Administration costs 0
E. Other costs
E. Total Other costs 0
TOTAL A+B+C+D+E 0
Category A deals with personnel costs. All personnel related costs are
included in this category. Salaries and fees need to be specified by each person
included in the project. If the specialist has not yet been identified, the needed
expertise is specified. In a bigger project for example, short-term specialist
input can be pooled and the work time needed can be estimated. Costs related
to travelling are budgeted following the current Finnish Government Travel
Rules and Regulations (Valtion matkustussääntö). The salary levels of locally
recruited personnel should be in line with local conditions.
27
Category B deals with training events. This specifies what kind of training
events have been planned and the costs related to the organisation of training
activities. However, all personnel costs (fees, travel costs, per diems,
accommodation) for trainers, Finnish coordinators, and so on must be budgeted
under personnel costs. Only language interpreting expenses may be included
here. In the overall budget, training costs must be specified according to
training event, although it can be budgeted as a lump sum by event. In other
words, it should be clear from the budget how many events are planned and for
approximately how many participants. The expenses of single training events
do not need to be further worked out at this phase. In general, this category
may include items such as rent for the training venue, publication or copying of
training material, participants accommodation costs, catering services,
interpretation services and expenses related to the organisation of the training.
As a general rule travel costs and per diems for participants are not paid.
Please note that although, for instance, the design and preparation of training
material might also be directly related to a single training course, it requires
work time allocation for the trainer and shall thus be treated as a personnel
cost, all of which are budgeted in category A.
Category C includes all procurement and other related costs that are paid only
against original supporting documents. The equipment, machinery, production
material, seeds, liquids, spare parts, etc. and material that the project is
intending to buy or co-finance needs to be specified in the budget. Investment
and procurement for Finland is not allowed. All procurement from Finland
must follow the current Finnish Government Rules and Regulations on
Procurement (Valtion hankintasääntö).
Category D, administration covers costs related to normal running costs of

project administration. These might be, for example, communication costs,
postage, copying, etc. Administration costs must be specified in the budget.
Again, no work should be included in this category. When it comes to local
rents, these are not normally paid by Finnish funding, since this cost item
indicates most clearly the level of local commitment to the project. If there is a
need to procure equipment for the administrative duties carried out in local
conditions, such as PCs, these must be budgeted under Procurement. In any
case, PCs or mobile phone equipment shall not be financed for the Finnish
partners.
The second major item that can be included in the Administration category is a
reservation for project evaluation. Contrary to the most fundamental budgeting
rule, this reservation shall cover all expenses foreseen for an evaluation
assignment. It also covers the work time allocation for an individual evaluator
or for an evaluation team, depending on the size and scope of the project.
Category E covers other costs. The project planner may suggest other
expenses accruing from activities that are undertaken in local conditions and
which have minor implications on the total budget. The expenses shall be
specified. In most cases it is highly recommended that a contingency lump sum
28
is reserved for unforeseen expenses. Contingencies must not be used without

consulting the financing authority.
The most fundamental question to be answered when planning the

implementation is: can problems be solved this way, i.e. with these
resources, activities, results and approach? It is the basic question of the
feasibility of the project. When assessing the feasibility, the analysis of
external factors assumptions and risks should be included.
29
CHAPTER 6: Risk Assessment and Key Assumptions
A project has always a limited scope, it cannot cope with all the problems and
needs. Therefore, the success of the project depends also from other, external
factors. For this reason, the project planner should pay critical attention not
only to the objectives and activities that are inside the project but also to
elements outside the project.
These external factors might affect the project at various phases. An external
factor might be so important that the project cannot even be started without that
factor being addressed. Therefore, it is important to define what conditions
have to be met before the project may be started. Other external factors may
influence the achievement of project objectives, be it the results, project
purpose or overall objectives.
Situation analysis provides the project planner with an overall view on the
project environment. Thereby, it also enables the identification of external
factors and conditions, that the project´s success is depending on. In case an
external factor creates a high risk for the project´s success, the plan should be
revised so that it is based on more realistic assumptions.
Those external, but critical factors to the project´s success are defined as
assumptions and presented in the project plan. Particularly those factors
affecting stakeholder response from the results level towards the project
purpose should be described in the project plan. However, there should always
be good justification to state a factor as an assumption, e.g. in case the project
relies on a legislative change, there should be reasonably strong evidence that
that legislative revision is going to take place. Factors of minor importance
need not to be included as assumptions. In case of unrealistic assumptions –
there is a high risk that the assumption will not be realised – the project plan
needs to be revised.
The project logic, covering elements both inside the project and external
factors lying outside the project, need to be tested and only those assumptions
and risks which are at an acceptable level shall be taken.
Risk assessment and description of assumptions must be included in the project

plan especially to ensure that all the parties involved in the project preparation,
financing, implementation or evaluation are aware on the issues assumed and
risks taken. The assessment also ensures the feasibility of the project.
Risks and assumptions indicate which external factors to the project

could jeopardise the implementation or achievement of results, project
purpose or overall objectives.
30
CHAPTER 7: Project Organisation
Every project needs a specific structure and organisation specifying the roles
and responsibilities of various actors. It is essential that the management and
decision making system is clear for everyone involved in the project, and also
to the financing authority. In the project proposal the project team has to be
specified as well as the key responsibilities of each team member. The project
partners, Finnish, local and other international organisations are briefly
introduced and their roles in the project implementation specified.
In order to promote ownership and motivation among the local co-operation

partners, and more generally to improve the bilateral co-operation programme,
every project should have a Steering Group. The respective Finnish financing
authority and its local partner organisation should be represented in the
Steering Group.
The key function of the Steering Group is to follow up how the project is
proceeding and to support the project management team in carrying out its
tasks. Project reports are discussed in the Steering Group and it is also the body
that approves all the reports.
The project plan proposes how the Steering Group could be put together and
gives a tentative meeting schedule. It goes without saying that the Steering
Group will be nominated in close co-operation with the financing organisations
before the project contract is signed. The composition of a Steering Group
should ensure an efficient, effective and structured decision making system.
As a part of the project organisation, and all the more so if there are several
organisations involved in the project, the project plan should describe how
potential problematic situations and conflicts will be solved.
31
CHAPTER 8: Monitoring and Reporting
In the tentative time schedule of project activities, the monitoring and reporting
activities should also be included. It is not possible to undertake these
management tasks properly without necessary resources, especially time, for
the task.
An indicative reporting cycle should be presented in the project plan. In any

case, reporting should be in line with the following minimum criteria:
An Inception Report in two to three months from the start of the project. The
Inception Report will be requested from every project with:
• an annual budget higher than 100.000 EURO; or
• a total budget higher than 300.000 EURO.
Nevertheless, the Inception Report is highly recommended to all project

implementers, not depending on the size or duration of the project. This is
primarily because it might provide the implementing organisation with the first
real possibility to review the project plan with the local stakeholder groups and
to ensure that the project logic does actually make sense for them, thus
strengthening the local commitment. Secondly, the inception phase provides
the project implementers with the possibility to screen the project environment
and to match the resources available to that context. This is usually necessary
even if the planning phase included detailed background studies as the political
and economic circumstances may change very rapidly in societies in transition.
A Progress Report every six months or annually (in this case it could also be
called Annual Progress Report). A Progress Report is not requested from
projects lasting less than twelve (12) months.
A Final Report is requested from every project, independent of the scope and
duration of the project. It must be submitted to the Steering Group and the
financing authority within a month of project completion.
Reporting guidelines are presented in more detail in Chapter 9.
32
Chapter 9: Guidelines for Project Management and Implementation
9.1 Work planning
Project implementation should not be started before signing the respective

contract with the financiers. This is particularly to ensure that expenses can be
covered by the project funds. The very first activity in the project launch is to
verify and review the overall project plan with the key stakeholder groups and
local partners. It is particularly important if there have been delays between the
planning period and the concrete starting date.
In bigger projects this review and validation of the project plan shall also be
reported to the steering group and thus to the financing authority. This phase is
called the Inception phase and it usually varies between 1–3 months. However,
the length of the inception phase should be negotiated with the financing
authority.
During the inception phase the project team should, in collaboration with the
local partners, familiarise themselves with the local conditions and situation
and review and update the overall project plan. Participatory approach during
the inception phase also strengthens the motivation and feeling of ownership
and commitment to the work among the local partners.
The findings of the inception phase and the possible revisions to the project
plan are then presented in the Inception Report. A more detailed work plan for
the first phase or year should be included in the Inception Report.
Requirements for work plans
Detailed work plans should be in line with the overall project plan. The
planned results are broken down into administrative and more operational
elements, i.e. outcomes, outputs or sub-results, depending once again on how
complicated and big the project is. Activities to be undertaken in order to
achieve the outcomes should be further specified and scheduled into concrete
and more detailed work and tasks.
The work plan should also indicate what resources are needed to carry out the
tasks, who is in charge of the tasks, how much work time is allocated for
project team members, what type of procurement is foreseen for the period.
The fundamental idea of regarding a project as a learning process culminates in

work planning. Information on the effectiveness and impact of a project, as
well as on how the results are met should be incorporated into the work
planning process; ultimately leading to a rolling planning. In other words,
leading to an on-going monitoring and work planning process during the
implementation. The key functions of a work plan are:
33
• To guide and enable the project team to create a joint perception on what
should be done, when and by whom in order to ensure that the project is on
the right track;
• To lay down basis for monitoring of the work done and to ensure that the
project is leading towards the desired objectives;
• To ensure efficient and effective project implementation;
• To highlight corrective measures needed in order to promote sustainable
results;
• To lay down a solid basis for reporting.
The work plan indicates:
• What achievements are expected by the end of this planning phase

• What the project team intends to do in order to achieve the results:
activities including management activities
• Resources needed to carry out the work (time, human and material
resources, equipment, etc.)
• Time-schedule for activities
9.2 Monitoring and reporting
The concept of monitoring is widely perceived with two different meanings:

monitoring as a self-assessment by the implementing project organisation and
monitoring as a follow-up activity of the financier. In these guidelines the
concept is used in the sense of an ongoing management task that is carried out
by the project team.
Monitoring activities include collection of data, analysis of the information and

experiences and drawing of conclusions. These are then recorded and reported
together with recommendations for future action to the Steering Group and
finally to the financing authority. Figure 5 visualises how the reports are
scheduled and what they cover of different project phases.
34
Figure 5
PROJECT MANAGEMENT
Year 1 Year 2 Year 3 Year 4
Overall project plan & inception report
Work plan
Progress Report Work plan
Final report
Decision making system, e.g.

•steering group
•m anagem ent team
What should be monitored?
There are two major areas in which the project management should be well
informed:
• issues directly related to the project activities and desired objectives
(results, project purpose and overall objectives);
• external conditions and elements outside the project’s scope but critical to
its success should be followed.
In other words, the project management should undertake self-assessment

exercises on how the objectives are being met. They should also analyse and be
aware of the changes in the project environment including the key stakeholder
groups, local strategies and policies.
Monitoring is the foremost task supporting and guiding the project

management to find successful and sustainable solutions and working methods
in their work. Based on the assessment of performance a work plan is prepared
for the next phase and proposed to the Steering Group for approval.
35
9.3 Reporting requirements
Reports are categorised in three depending on the time they are submitted to
the Steering Group:
• Inception Report shortly (1-3- months) after the launch of the project
• Progress Reports during the project implementation, either annual or
quarterly reports
• Final Report when the project has been completed.
These reports create the basis for the Integrated Approach in the Finnish
bilateral co-operation programme. The key principle of reporting is that
attention is paid to the same important and critical elements from the early
preparation until the very end, project completion. By requesting the same
structure to be followed the Finnish Ministry for Foreign Affairs is aiming at
improving the co-operation programme by creating a system that enables
lessons learned to be incorporated in decision making systems and future work.
In general the monitoring and reporting should focus on six key elements:
• Project environment
• Project performance vis-a`-vis the objectives and plans
• Detailed work plan and budget for the next phase
• Sustainability factors related to the project
• Risks and critical issues
• Recommendations for next phase.
The structure and contents requirements of reports are briefly described in the
following tables.
36
INCEPTION REPORT
Project Identification Sheet
Background and present situation

• Political support
• Institutional capacities
• Economic & financial resources
• Socio-cultural acceptability
• Appropriate technology
• Environmental impacts
• Gender issues
• Stakeholder motivation
Commitments by local partners (Description of local partners and how they are committed
to the project)
Projects and programmes completed or ongoing in the area in the resp. sector
(Project´s relation to other reform processses)
Overall project plan (reflecting the original project plan and proposal for revisions regarded
as necessary for successful project implementation; focuses on whole duration of the project)
• Objectives (Overall Objective, Project Purpose, Results)
• Activities
• Resources
• Procurement
• Project organisation
• Risk assessment
Detailed workplan / action plan for the next phase

• Project purpose
• Results to be delivered and to which extent by the end of the phase: Concrete
outcomes or services to be provided during the next phase. Described with qualitative and
quantitave indicators, indicating direct beneficiaries, place and time
• Time schedule for activities to be undertaken with milestones and person
responsible for the activity Tasks are specified and scheduled in time. The person in
charge of the respective task is named and other resources needed to carry out the task are
described.
• Detailed budget for the phase Detailed budget of the planning phase is proposed (in
accordance with the original overall budget)
Specific issues
37
PROGRESS REPORT
Project identification sheet
Summary of project environment: Background info
Project performance
• Project Objectives: Objectives described (should not normally be changed, but revised
if necessary).
• Results achieved Description of services and products delivered by the project during
the reporting period.
• Activities implemented / Actual expenditure Specification of tasks undertaken,
work done and resources utilised
• Activities not undertaken as planned / Reasons for deviations Description of
what was planned but not done or what new activities were introduced that were not
planned and reasons for these deviations, be they positive or negative
• Conclusions (posit. & negat. deviations) Consequences of the activities not carried
out as planned.
• Project organisation Information on the project team, changes in personnel, changes
in local partners, project meetings held , etc.
• Recommendations for the next phase Lessons learned and what should or should
not be done during the next period
Proposal for work plan for the next phase

• Project Objectives At least the Overall Objectives and the Project Purpose should
remain the same. If the Project Purpose is revised, it should be based on a profound
analysis and be argued with sufficient, reliable and valid information
• Results to be delivered and to which extent by the end of the phase Concrete
outcomes or services to be provided during the next phase. Described with qualitative and
quantitave indicators, indicating direct beneficiaries, place and time
• Time schedule for activities to be undertaken with milestones Tasks are
specified and scheduled in time. The person in charge of the respective task is named and
other resources needed to carry out the task are described.
• Budget Detailed budget of the planning phase is proposed (in accordance with the
original overall budget)
Sustainability factors and to which extent they are ensured

• Gender issues
Risk assessment / Critical issues Reflect the project performance and the plan for the next
phase with the sustainability factors and highlight potential risks or other critical issues that might
jeopardise the implementation of the project or the sustainability of the project’s Results and the
Project Purpose.
38
FINAL REPORT
Project identification sheet
Analysis of the project environment
Project performance
• Project Objectives / achievement
• Results achieved
• Activities undertaken / resources utilised
• Reasons for deviations (positive and negative)
Impact assessment
• What kind of positive impacts the project seems to have on the wider society or community
(at the level of final beneficiaries)
• What kind of negative impacts the project has had or probably will have on the wider
society or community (e.g. conflict of interest - identify from various stakeholder group
viewpoints)
• Intended positive and negative impacts on the wider society or community
• Unforeseen positive and negative impacts on the wider society or community
Project in relation to stakeholders / local reform processes / overall strategies of the

Finnish Bilateral Co-operation Programme
• Assessment of direct & indirect stakeholder satisfaction on services and products
delivered
• Projects contribution to local reform processes
• Projects contribution to financiers strategies
Sustainability factors and to which extent they are ensured

• Gender issues
Risks & critical factors
Recommendations for future projects and programmes (lessons learned)
39
Monitoring and reporting should not be misunderstood and regarded as a

bureaucratic act. Reporting is often neglected and legitimised by concentrating
on the “real work”, the field work. However, a good monitoring and reporting
system creates a solid basis for assessment, decision-making and planning. In
the end, analytical and transparent reporting also justifies the use of public
funds.
The monitoring and reporting activities are one cornerstone in the

management of a successful project, because:
• With critical assessment and follow-up activities the project

management is able to adjust and revise the implementation
strategies, if necessary, and thus ensure successful achievement of
objectives
• With good monitoring and reporting the project management is
also contributing to the improvement and development of the
sectoral co-operation programmes and ultimately to the Finnish
Co-operation Programme overall.
9.4 Invoicing
The invoicing cycle should follow the reporting cycle. This principle means
that the project shall invoice from the same period for which it is submitting
reports. The detailed reporting and invoicing cycles should be defined in the
contract between the project implementing organisation and the financing
authority.
The implementing organisation can invoice as an advance payment a maximum

sum equivalent to 20% of the total project budget after the project contract has
been signed. Bank guarantees are necessary for the full amount of the advance.
The project is not allowed to invoice the financing authority before it has
utilised the majority of the funds that have been paid in advance.
Invoicing is based on work done or utilities procured and in accordance with

the budget categories and lines.
Personnel costs
Fees and salaries will be invoiced based on the rates approved and according to
actual work time utilised. Work time used will be specified by the persons
involved and confirmed by the Team Leader. The budgeted unit costs may not
be changed without prior approval from the financing authority. Also,
reallocations of work time between the team members need to be approved by
the financing authority in advance.
40
All travel costs must be invoiced against copies of original receipts according
to the current Finnish Government Travel Rules and Regulations (Valtion
matkustussääntö).
Training events
Training events have been budgeted as lump sums. When invoicing for the
costs accrued, the project implementers should break down the costs into major
items, such as training venue, training material, interpreting, participant
accommodation costs, catering services, etc. Copies of original receipts must
be attached to the invoice. Travel costs and per diems of neither Finnish nor
local participants in training are not covered.
Procurement
Goods and utilities procured can be invoiced only against supporting
documents proving the costs to be valid. Procurement to Finland is not
allowed. The maximum amount budgeted for these costs must not be exceeded
and the current Finnish Government Rules and Regulations on Procurement
(Valtion hankintasääntö) should be followed.
Administration
Costs for project administration can be invoiced according to the approved
budget.
Other costs
Other costs are handled according to the nature of the cost item. For example,
housing allowance shall be proved with supporting documents if so requested
by the financing authority.
As such, contingencies create only a reserve and cannot be utilised by the

project. To launch the funds it is necessary to reallocate them to specific
purposes beforehand and this reallocation requires a written approval from the
financing authority. Contingencies might be used for personnel costs, for
organising a training event or to procure exceptional needs arising in the
project, as long as they fit within these general rules. These funds will be
invoiced according to the rules applying to that specific cost category for which
they were re-allocated.
41
Guidelines for Project Planning, Monitoring and Reporting ANNEXES
ANNEX 1: Project Cycle Management (PCM)
By using the Project Cycle Management (PCM) method the international donor
community is aiming to widely improve the quality and impact of co-operation
programmes. One key characteristic of these programmes is that co-operation
is undertaken and operationalised in the form of projects. The use of the PCM
method means that a project life cycle is divided into separate but progressive
entities, starting from the early project idea and extending beyond the project
lifetime.
This approach stresses that attention is especially paid to the preparation and
planning of projects, to the assessment of the various kinds of projects by using
the same guiding principles, and to attempts to learn from past experiences.
Furthermore, special emphasis is put on evolving local stakeholders and
partners for the planning and implementation of projects in order to improve
the effectiveness and impact of the co-operation at the project and programme
levels.
The PCM method consists of three main elements:
• using the Project Cycle;

• applying the Integrated Approach; and
• approaching planning with Logical Framework tools.
The Integrated Approach links the objectives of a single project to the

objectives and strategies of overall bilateral co-operation, as well as with the
strategies, policies and reform programmes of the partner country. This is
ensured by focusing on the same critical issues of relevance, feasibility and
sustainability in all planning and implementation and also by using the same
basic formats in reporting.
In Finnish bilateral co-operation the Project Cycle consists of seven phases:

Programming, Identification, Formulation, Appraisal, Financing,
Implementation and Evaluation.
42
Figure 6
Partner
Partnercountry’ssown
country’ own International
International Strategy
Strategyand
andobjectives
objectives
programmes strategies and of Finnish bilateral
programmes strategies and of Finnish bilateral
programmes
programmes cooperation
cooperation
programme
programme
COUNTRY
COUNTRYCONSULTATIONS
CONSULTATIONS
(PROGRAMMING)
(PROGRAMMING)
EVALUATION
EVALUATION IDENTIFICATION
IDENTIFICATION
MONITORING
MONITORING&& FORMULATION
FORMULATION
ROLLING
ROLLINGPLANNING
PLANNING
IMPLEMENTATION
IMPLEMENTATION APPRAISAL
APPRAISAL
FINANCING
FINANCING
When looking at the project cycle as the lifecycle of a single project there are
two key characteristics:
1. Project planning is divided into three levels: identification, formulation and

work planning during the implementation phase. The outcome of the
appraisal phase, the project plan, is the strategic management tool for the
implementation whereas details of project implementation are further
worked out and specified in the work plans.
2. In order to establish and manage the project as a learning process, feedback
from project implementation must be incorporated into the work planning
process. This indicates that the project team should follow-up the project
environment and undertake self-assessments of their success, i.e. monitor
the work done during implementation. This is only possible if the project
plan offers tools for the assessment: specified objectives and indicators for
performance monitoring.
The use of the project cycle in managing bilateral co-operation establishes a

structured decision making system. The different phases of the project cycle
are briefly described below.
Programming serves as the backbone of bilateral co-operation. The

programming process is carried out at the national level by the Finnish
Ministry for Foreign Affairs and its counterparts in the partner countries. At the
sector level the respective Finnish ministries are in charge of the sector
programmes. The focal areas and priorities are defined during the
programming phase, based on an assessment of political and strategic
43
priorities, policies and needs. The concrete outcomes of this phase are sector
specific strategy papers and minutes of the annual negotiations.
Project ideas are often agreed upon during the programming phase. Planning
then continues with systematic project identification. During this phase, the
interests and possibilities, needs and problems, opportunities, etc. of the
project´s stakeholders are identified. Since there are always several alternative
strategy options available for a project, a critical assessment of the needs,
interests, priorities, etc. of the identified stakeholders is a pre-condition for
selecting the most relevant and feasible scope and approach for a project. An
assessment of the feasibility of alternative solutions is also recommended. In
any case, some background studies are needed during the identification phase.
Also, commitment of the partners to the selected approach should be verified
during this phase. The project´s linkages with other reform and improvement
processes should be identified in order to avoid duplication or contradictory
approaches.
Detailed project formulation should start only after the basic strategy has been
selected and approved by the stakeholders. Project preparation may include
some additional background studies and analyses, such as financial and
economic analyses, institutional assessment, assessment of social and
environmental impacts, and so on. During this formulation, the overall project
strategy is further specified and described. The outcome of the formulation
phase is the project plan (project document, terms of reference).
Planners can easily become blind to their work. Therefore, a well-prepared

project plan may even involve serious risks that planners can no longer see and
have overlooked. In order to ensure that the project is relevant, feasible and
sustainable and that it relies only on acceptable risks, the plan should be
assessed systematically and objectively by impartial and independent expert(s)
before it is finalised. This appraisal is particularly important if the project is
based on a ready-made plan prepared by the partner organisation. The
relevance, feasibility and risks related to implementation and sustainability are
analysed during the appraisal phase.
Sometimes, an appraisal mission to the project site is needed, although this

appraisal may also sometimes be done as a desk study. In large projects (annual
budget higher than 100.000 EURO or total budget exceeding 300.000 EURO)
the Finnish Ministry for Foreign Affairs is responsible for the appraisal. In
small projects the respective ministry is in charge of the appraisal. Usually, the
appraisal report recommends some revisions to the original project plan. The
concrete outcome of the appraisal phase is the revised project plan.
The revised project plan serves as the basis for the financing decision. When
financing has been approved, the implementation can start. If the
implementing agency is selected through competitive tendering a tender is
launched and the project is contracted. The revised project plan has three main
functions:
44
1. It is the main strategic management tool which lays down the basis for
implementation;
2. In the case of a tender being launched, project plan serves as the main
tendering document; and
3. It is the legally binding document on which the project contract is based:
between the financier and the local partners; and between the financier and
the implementing agency.
The financing phase ends up with signing the project contracts.
Project implementation starts with ensuring the validity and relevance of the
original overall project plan and preparation of detailed work plans for the first
phase of the project. One of the most fundamental parts of the implementation
and management of the project is a systematic monitoring system enabling on-
going follow-up of the implementation process and an assessment of the effects
and impacts of the project. A well functioning monitoring system creates a
learning environment during implementation, providing possibilities to make
corrective measures to project work plans if necessary, and thus paving the
way for successful co-operation. Monitoring activities also aim at
disseminating good practices and experiences – but also those that should be
avoided – to relevant and interested stakeholders. Outcomes of the
implementation phase are twofold: services to local beneficiaries and reports of
the work done, including work plans for the next planning period.
The last phase of the project cycle, the evaluation may be carried out during
the implementation or when the project has been completed. The aim of
evaluations is to provide a systematic and objective assessment of projects,
programmes or policy. Evaluation should provide information that is credible
and useful, enabling the incorporation of lessons learned into the decision
making processes of both the partner countries and the financiers. Evaluators
should be independent from the planners, implementers and financiers. The
involvement of local specialists in evaluation teams is highly recommended.
Depending on the type of evaluation carried out, the outcome may be called a
mid-term review, final evaluation or ex-post evaluation.
Logical Framework (LF) tools are used both in the project preparatory phases
and during implementation. By encouraging the use of LF tools in project
design, planning and implementation the financier aims at ensuring that the
project implementing partners identify more relevant project niches, that
intervention strategies are realistic and feasible, and ultimately, that more
sustainable results are achieved. The LF tools consist of :
1. Situation analysis (stakeholders, resources, problems & opportunities)

2. Analysis of objectives and possible strategies
3. Design of the project strategy
4. Planning of implementation
5. Workplanning
The most fundamental ideas behind the Logical Framework Approach are
threefold:
45
1. Co-operation with the beneficiaries from the very beginning

2. Problem and needs based approach
3. Objective oriented approach
The project planner should pay attention particularly to the three guiding
principles of relevance, feasibility and sustainability during project preparation
and, ultimately, during implementation.
46
ANNEX 2: List of appropriate PCM manuals and guidelines
Manual Project Cycle Management. Integrated approach and logical

framework. Commission of the European Communities, Evaluation Unit
methods and instruments for Project Cycle Management, 1993.
Guidelines for Programme Design, Monitoring and Evaluation. Ministry for

Foreign Affairs, Finland, 1997.
Project Cycle Management Training Handbook, European Commission, SCR

Evaluation, 1999.
http://europa.eu.int/comm/scr/evaluation/methods/pcm.htm
Includes also links to the websites of Financial and Economic Analysis and
Guidelines of Evaluation.
Evaluation of development assistance. Handbook for evaluators and managers.

Royal Ministry of Foreign Affairs, Norway 1993.
In Finnish language:
Projektinvetäjän opas, Silfverberg, P., Työministeriön ESR-julkaisuja, 2000.

http://mol.fi
Manual for Development Co-operation of Non-governmental Organisations,

parts I and II, Ministry for Foreign Affairs of Finland, Department of
Development Co-operation, 2000
http://global.finland.fi
47
ANNEX 3: Budget
* Expenses allocated by financing

sources
Categories Unit No of Unit TOTAL MfFA Local funds Others
units cost COSTS
A. Personnel costs (1)
A.1 Finnish salary based staff 0
(2)
A.2 Consultancy fees (3) 0
A.3 Local staff (4) 0
A.4 Administrative staff (5) 0
A.5 Per diems (6) 0
A.6 Travel expenses (7)
A.6.1 Travel costs
A.6.2 Hotel accommodation 0
Total Personnel costs 0
B. Training events (8)

B.1 Workshops lump sum
B.2 Seminars lump sum
Total training costs 0
C. Procurement (9)
B.1 Equipment & machinery 0
B.2 Spare parts 0
B.3 Maintenance costs 0
B.4 Other procurement 0
Total Procurement costs 0
D. Administration
D.1 Office costs (10) lump sum
D.3 Evaluation (11) lump sum
Total Administration costs 0
E. Other costs (12)

Housing allowance 0
Contingencies lump sum
Total Other costs 0
TOTAL 0
A+B+C+D+E
48
(1) Expenses under the Personnel costs category cover all personnel related
costs. ALL WORK that is to be undertaken in the project shall be budgeted in
this main category. The salaries and fees must be specified and work time
allocated by person. Under this category the units usually used for project staff
are work days (wd) or work months (wm). A work day consists of 8 hours or
according to local regulations and rules, whereas a work month includes 21
work days. The project work will be compensated according to time sheets or
other supporting material indicating the actual work carried out. This shall be
specified by the persons involved.
(2) The sub-category Finnish salary based staff includes the work carried out
by government/ministry officials and authorities. The unit rate covers the
actual salary and related social and other costs.
(3) Consultancy fees cover other Finnish specialist work. The unit rate does not
strictly follow the salary rate but may include some overheads. Fees are
invoiced against utilised work time, not covering sick leave or holidays.
(4) Local staff covers both the specialist and administrative work. The salary
should be in line with the local salary levels. The unit cost covers all pension
and other social costs. Tasks of the local staff shall be specified, but persons
might still remain unidentified.
(5) Administrative staff relates to assistance and secretarial services provided

by the project home office in Finland. Unlike in the case of the fees and
salaries, persons might remain unidentified. However, the services or tasks
shall be specified, e.g. project assistant.
(6) Per diems are paid according to the current Finnish Government Travel
Regulations (Valtion matkustussääntö).
(7) Travel expenses are divided between travel costs, e.g. flights, train tickets,
mileage allowances and hotel accommodation. Depending on the method of
travel the unit may vary, e.g. return flights, return journeys or km´s. Hotel
accommodation needs to be further specified by country if accommodation is
needed both in Finland and other countries. All in all, the budget planner
should ensure that the sub-category A.5 Per diems and A.6 Travel costs are
consistent.
(8) Training events need to be specified by event. If the plan consists of three
different seminars, it means three budget lines. Personnel expenses may NOT
be included here. If a trainer is needed, those expenses are budgeted under
Personnel costs. This budget category includes other training related costs, like
training material production (publishing or copying); training venue;
interpretation costs; meals and other participant related costs. However, it
should be noted that the local financing contribution is to be emphasised and
supported. Therefore, as a general rule travel costs and per diems for
participants are not paid; neither for Finnish nor local participants. Training
49
events can be budgeted as lump sums. At the time of invoicing the expenses
shall be specified.
(9) The Procurement category consists of all materials, seeds, equipment,

machines and other products that the project intends to finance or invest in, or
spare and other supply parts needed in maintenance and repair work.
Investments and procurement for Finland or for Finnish partners are not
allowed. The procurement must be specified according to items. The work time
needed is budgeted under Personnel costs. All procurement from Finland shall
follow the Finnish Government Regulations on Procurement (Valtion
hankintasääntö).
(10) Office costs cover the project related communication costs, copying,
postage etc. and normal costs accruing from project administration and
management duties. In very specific cases the rent for the local project office
may be covered.
(11) Evaluation shall be budgeted as a lump sum. These funds cover both the
evaluation work and all evaluation assignment related expenses like travel
costs. This sub-category is only indicative and needs to be further specified and
agreed with the financing authority before the funds can be utilised.
(12) Other costs may include untypical project specific items that are not
specified in any other category, e.g. housing allowance for a Finnish team
member. In such cases the assignment should be longer than six (6) months
continously. Contingencies may also be budgeted. They form a reserve for
unforeseen expenses, and need to be specified and consulted with the financing
authority before their utilisation.
50

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Ministry for Foreign Affairs of Finland

Division for Eastern Europe and Central Asia

CHAPTER 1. INTRODUCTION ..............................................................................................................................2

CHAPTER 6: RISK ASSESSMENT AND KEY ASSUMPTIONS ........................................................................30

CHAPTER 7: PROJECT ORGANISATION .........................................................................................................31

CHAPTER 8: MONITORING AND REPORTING ...............................................................................................32

CHAPTER 9: GUIDELINES FOR PROJECT MANAGEMENT AND IMPLEMENTATION ...........................33

ANNEX 2: LIST OF APPROPRIATE PCM MANUALS AND GUIDELINES....................................................47

ANNEX 3: BUDGET ...............................................................................................................................................48

The principles and objectives of the Finnish bilateral co-operation programme

• Strengthening bilateral contacts with partner countries and the promotion of

Due to different circumstances in the Russian Federation and the Baltic

Finnish bilateral co-operation strives to co-ordinate with other international co-

Finnish financial support is channelled through several instruments including:

1.2 Purpose of the guideline

The guideline aims at supporting the project designers - Finnish authorities,

Bilateral projects are categorised in small projects and large projects.

Project is a small one when

A large project has

How to use these guidelines

CHAPTER 2: APPROACH AND KEY PRINCIPLES

2.1 Process of project design and planning

This approach is presented in the figure below.

PPr or obbl elemm

IM PACT AND RISK ASSESSMENT

The planning process starts with collection of basic background information

For example, the situation analysis may be organised in a form of a

2.2 Sustainability factors

Sustainability is one of the most important guiding principles that should be

Sustainability includes several critical dimensions. The project planner should

• Are the policies realistic and sound?

2.3 Project concept

A good project plan fulfils the following requirements:

The project has a clear and efficient management structure and

sector ministry finance a certain equipment or will the local counterpart be

Contents of a project plan:

4. Objectives and their verification

8. Risk assessment and key assumptions

10. Monitoring, reporting and evaluation

CHAPTER 3. Situation analysis

3.1 Background studies

Political factors; national and regional policies and strategies, political

Institutional factors; responsible administrative organisations and their roles,

Economic and financial resources and factors; government and municipal

Infrastructure and technology; technology and technical systems applied in

Social and cultural conditions; existence of different kind of stakeholders and

Environmental factors; natural resources, environmental conditions,

3.2 Stakeholder analysis and resource assessment

Any individuals, groups of people, organisations or companies that will have a

How do we analyse the stakeholders?

1. Start with identifying the various players who:

Stakeholder analysis and resource assessment - key function and

è Different stakeholder groups and their roles

3.3 Problem analysis

How do we analyse problems?

• Final beneficiaries (“end users”, “customers”); for example in a health care

• Possible levels of processing, trade and training/education; e.g. medical

Economic and financial factors

Social and cultural factors

The problems are always unique to a project. Therefore, problem analysis

Altogether problem analysis is carried out in order to find answers to the

Several methods may be applied in problem analysis. For example, SWOT