In-Year Budget Control and Management Andrew Graham Queens University School of Policy Studies MPA 827 2015

In-Year Budget Control and Management

Andrew GrahamQueens UniversitySchool of Policy StudiesMPA 827 2015

Structure

Today: lecture, first part

Cash Management Class Exercise

Tomorrow: Reprise and more material

Group work on final assignment.

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RepriseReprise

Focus on internal management of budgets in-year – management accounting

Basis for adapting approved budget to changing circumstances

Cash Management Exercise: a scenario of a financial situation will be presented and you will be asked to brief your boss, the Deputy Minister as well as your colleagues on the senior management committee

3

DefinitionsDefinitions

Cash, budget, treasury and liquidity can get confused at this point

No one term exists for the management of in-year budgets

This is not about managing bank accounts to ensure adequate cash is on hand: that is a liquidity management function – commonly called cash management

This is not about the effective use of cash at hand in terms of short-term investments: that is a treasury function

Goal: managing the budget at hand effectively.

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Cash Management = In-Year Budget ManagementCash Management = In-Year Budget Management

Why Budget and Forecast?

Budgets and Forecasts

A budget is a formally approved plan for the operation for a specific period.

An approved budget becomes the benchmark to test your actual results

A forecast is a projection of activity based upon the latest information.

Why Budget and Forecast?

Budgets and Forecasts

Measure actuals and forecasts against the budget throughout the planning process.

Analyze anticipated versus actual results – variance.

Predict future performance and anticipate changes.

Assist in monitoring control of current performance.

Provide early warning of deviations from plans. Take actions needed.

DefinitionDefinition

In-year budget management is the system which compares actual expenditures against unit spending plans for a given financial year, identifies risks and variances and enables the

adjustment of resource allocations to reflect changed circumstances in the that year.

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Budget Cash Management is not a way to re-open the budget decisions but to adapt to changing circumstances.

Budget Cash Management is not a way to re-open the budget decisions but to adapt to changing circumstances.

Effective in-year budget management creates opportunity for managers to:

Ensure that they remain within budget Alert senior management to shifts in demand for

services or other cost drivers Maximize the use of their funds so that they are

fully expended for their stated purpose and opportunities to meet emerging needs are met

Reallocate within a current year so meet unanticipated needs

A means of assessing departmental, unit and individual performance

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Key Part of the JobKey Part of the Job

Responsibility of all responsibility centre managers

Knowing how to do it is important

Uses tools of control, risk management, forecasting, good financial reporting and analysis

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Managing the Budget Reflects on Managing the Budget Reflects on PerformancePerformance

Out of control budgets suggest bad management or failure to adapt to changing circumstances.

Money unspent in a persistent or perverse way suggests failure to deliver full program or program shifitng.

An organization’s ability to collectively manage its current resources most effectively reflects its overall capacity to work as a team or unit toward a set of coherent goals

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Managing the Budget Reflects on Managing the Budget Reflects on PerformancePerformance

The degree of flexibility and decentralization in an organization will have an impact on how cash is managed in terms of how it can and cannot be redistributed, the degree of reporting and the scope and role of central corporate

offices within the organization

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Actual Cash Remains a ConcernActual Cash Remains a Concern

In the public sector, even with accrual accounting, there remains a high measure of accountability for explaining what is happening to voted funds within one year.

Financial reporting requires this annualized approach.

Some argue that the main concern is how cash is used during the period and not matching revenue and expense which is of a higher priority in the private sector – this remains a preoccupation of many players in the scene: managers, clients, oversight groups and legislators

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Importance of in-Year Budget Importance of in-Year Budget ManagementManagement

Organizations are always looking for spare capacity and this is one way of finding it in the short term.

It does not replace permanent reallocations, program evaluation or policy making that shifts resources in a formal way, i.e. legislatively or through other policy instruments.

Budgets can be complex landscapes.

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Compliance Adaptability

What could possibly go wrong?

Errors in reporting – accounting systems can be wrong

Incomplete information

Budget plan proved to be inaccurate

Actual events did not conform to plan

Unanticipated surges in demand or loss of revenue

Catastrophic events

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The Objectives of Effective In-Year Budget The Objectives of Effective In-Year Budget ManagementManagement

To have funds to pay the bills, i.e., sufficient liquidity

To use budgeted resources for their program purposes and not leave needed funds unspent

To keep within the appropriated or authorized budget

To have the organizational and resource capacity to react to changes in plan

To reallocate available funds to meet emerging, short-term priorities.

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The Big Three Questions

What has happened so far? What do we think will

happen to our plan for the rest of the year?

What (if any) actions do we need to take to achieve our agreed plan?

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Qualities of the Financial Performance Review Qualities of the Financial Performance Review ProcessProcess

Focus on a few critical aspects of performance

Look forward as well as back

Explain and react to key risk considerations

Explain and react to key capacity considerations

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Source: Reporting Principles, Canadian Comprehensive Audit Foundation, 2003

Qualities of the Financial Performance Review Qualities of the Financial Performance Review ProcessProcess

Explain other factors critical to performance

Integrate financial and non-financial information

Provide comparative information

Present credible information, fairly interpreted

Disclose the basis of reporting

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In some countries, this is the lawIn some countries, this is the law

The accounting officer in New Zealand must submit to the relevant treasury and executive authority within 15 days of the end of each month, information on:

· the actual revenue and expenditure for that month, in the format determined by the national Treasury· projections of anticipated expenditure and revenue for the remainder of the current financial year in the format determined by the national Treasury· information on conditional grants received and actual spending against them· information on all transfers· any material variances and a summary of actions to ensure that the projected expenditure andrevenue remain within the budget.

Movement towards government-level Interim Financial Reports

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Operational Cash Forecasting Goes Beyond Operational Cash Forecasting Goes Beyond Financial StatementsFinancial Statements

Knowing about cash movements to date based on financial reports is not enough

Encumbrances and anticipated risk or costs changes are not reflected

Cash forecasting and financial reporting moves into the realm of bringing content, knowledge and numbers together

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From Cash Flow to Cash Forecasting: From Cash Flow to Cash Forecasting: Financial StatementsFinancial Statements

Financial analysis uses the financial statements and other sources of information to: help managers and outsiders

understand an organization's financial condition,

make decisions about the organization, and

compare an organization's financial performance to its peers.

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There must be confidence in the retrospective information to then add in the value of management forecasting, commitments and risks

Analysis of just financial statements rarely gives a final answer

Rather, it indicates where further analysis is needed

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Good organization management, regardless of the size of the organization, demands that the organization regularly review its financial situation

Financial Statements/Cash Forecasts/ Financial Report/Review of Performance Reports are different names for such a process

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The In-Year Budget Management MixThe In-Year Budget Management Mix27


The cash management process is not a purely financial function. In fact it will fail if it is.

Managers’ input at the beginning, middle and end is essential

Most financial information is submitted to the manager for decision

Means moving some decisions up the ladder, overseeing other financial managers, aggregating data to the level of the entity

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Some other basic questions that good Some other basic questions that good financial analysis can help answerfinancial analysis can help answer

Is the organization on budget?

Will there be over-runs, will there be surpluses?

Have the budget assumptions changed?

Is resource use matched to objectives?

How is the organization or its units performing relative to previous years, to each other and to plan?

Are significant shifts being detected in this data?

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Some other basic questions that good Some other basic questions that good financial analysis can help answerfinancial analysis can help answer

What is the significance of these shifts?

Is there a need for extra-ordinary action? Supplementary funding? Internal reallocation? Emergency funding?

How are managers performing?

What opportunities exist to solve problems internally or to meet unplanned demands that are nonetheless important for the organization?

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Elements of an In-Year Budget Management Elements of an In-Year Budget Management SystemSystem

An appropriated budget

Build in changes and modifications to the approved budget to create an adjusted budget

Cash flow projections over the budget period: the in-year cash flow or expenditure plan

A system of measuring actual financial performance in relation to the projected plan

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Elements of a Cash Management SystemElements of a Cash Management System

A system of monitoring performance, identification of variances and reporting results at the appropriate level

The capacity for management discussion and analysis of the results and variances

A governance mechanisms that would review the results, assess variances and their analysis, determine adjustments needed and make decisions needed to affect those

adjustments.

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Roles and Responsibilities Roles and Responsibilities

Senior management must set budgets and program direction

Line managers must manage the resources they are given to carry out programs

Financial advisors must provide information for decision making to budget setters as well as advice line managers about their budgets

Financial advisors must also provide information and analysis to identify variances, offer comparisons and further analysis of budget perform and make recommendations to line managers and senior managers

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Roles and Responsibilities Roles and Responsibilities

Financial advisors must prepare reports for senior mangers to make decisions

Line managers must respond to variances against plans with explanations, solutions and alternatives

Senior managers must determine what actions to take based on these two sets of inputs.

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Budget Appropriated

AdjustedBudget

Budget Plan for Year

Cash Requirements

Hold Backs/Reserves/

Adjustments

Reporting Results: Actual

vs Plan: Financial and Operations

Variance Reports and

Analysis

Management Discussion

and Analysis

Senior Management

Reporting and Review

Senior Management

Direction: Reallocation

Adjusted Budget Plan for Year

Assess Budget

Implications for Next Year

The In-Year Budget Management CycleThe In-Year Budget Management Cycle

Expenditure Plans of Organization: Budget, Expenditure Plans of Organization: Budget, ProgramProgram

All financial reporting and in-year decisions begin with a budget allocation to a responsibility centre

Difficult to hold a manager accountable if she/he does not know his/her budget

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Impediments to establishing a base Impediments to establishing a base budgetbudget

Uncertainty in the financial position

Failure of legislative authority to approve appropriations

Failure of the department/ministry to distribute the budget to responsibility centres

Program change announcements made without budget adjustments

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Impediments to establishing a base Impediments to establishing a base budgetbudget

Senior managers withhold authorities pending further changes

Dependency on external funding sources, e.g. intergovernmental transfers

Multiple sources of program funding within the organization but not within the responsibility centre, e.g. centrally held funds

Creation of reserves, hold-backs and only provisional budgeting

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[1] Grants and Contributions are a Special Fund and cannot be reallocated to other budgets.[2] Capital Expenditures are a Special Fund and cannot be reallocated with permission from Management Board using a formal submission process. However, some non-recurring salary costs for project management and implementation can be built into the capital budget.

Allotment Original Budget - April 1

Salaries 217,600,000

Benefits [1] 43,520,000

Overtime Salary Dollars 4,085,000

Operating and Maintenance 64,766,850

Grants and Contributions[2] 5,600,000

Capital Expenditures [3] 7,500,000

Total 343,071,850

Average FTE Costing 68,000

Total Number of Approved FTEs [4] 3200


Budgets for responsibility centers are the result of the budgetary process that is then modified within the organization as funds are distributed

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Reviewing what is a Reviewing what is a responsibility centre in an responsibility centre in an

organization: chief defining organization: chief defining characteristics.characteristics.

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[1] Allowances are automatically distributed in the same way.

Allotment DMO Policy Operations Inspection CIO CFO Total

FTE 150 150 1200 1100 300 300 3200

Salaries 10,200,000 10,200,000 81,600,000 74,800,000 20,400,000 20,400,000 217,600,000

Allowances 2,040,000 2,040,000 16,320,000 14,960,000 4,080,000 4,080,000 43,520,000

Overtime 0 250,000 1,000,000 2,335,000 500,000 0 4085000

O & M 3,000,000 2,000,000 20,000,000 24,000,000 11,000,000 4,766,850 64,766,850

Gs & Cs 2,000,000 3,600,000 0 0 0 0 5600000

Capital 500,000 300,000 2,000,000 2,000,000 2,500,000 200,000 7,500,000

Total 17,740,000 18,390,000 120,920,000 118,095,000 38,480,000 29,446,850 343,071,850


Subject to adjustments and clarifications: In-year program adjustments External charges, e.g. central services Reserves and partial distributions by senior

management

Objective is to arrive at the Adjusted Budget of the responsibility centre

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To Get to an Adjusted BudgetTo Get to an Adjusted Budget

Take original budget

Apply changes: increases, decreases, etc

Allocate to units and total.

An adjusted budget is not a projection: it reflects decisions and changes subsequent to the original budget

Important to clarify exactly what the budget manager has to work with at the start

Budgets can also be adjusted throughout the year as part of the cash management process, as new funds become available (or are removed) or to reflect policy changes.

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LINE ITEM BUDGET

This fiscal year

CHANGES ADJUSTED BUDGET

This fiscal year

SALARIES 3,500,000 750,000* 4,250,000OVERTIME 500,000 (100,000)** 400,000TRAINING 250,000 75,000¹ 325,000TOTAL STAFF COST

4,250,000 725,000 4,975,000

*Salary adjustments from collective bargaining = 400,000 plus 350,000 from DM’s special youth employment funds

** Departmental target to reduce overtime – your share is 100K

¹Special central agency funding – one year only – for technology training.

Developing a Cash Flow Plan for the Developing a Cash Flow Plan for the Responsibility CentreResponsibility Centre

In-year cash management requires a sense of how funds will flow or be expended

Eliminate non-cash accruals

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Do Not Just Divide by 12!Do Not Just Divide by 12!


Generally managers are expected to prepare cash flow plans based on: Historical data Their program plans – the implementation

side Know commitments Addressing risks

Not all funds flow at once – some costs are distributed over the fiscal year, some are spent at one time, some are held in reserve

Often capital is on a different cash flow cycle and not included.

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Such flows are predictable within limitations. e.g. salary dollars

Some are less predictable in terms of planning, e.g. overtime, but such unpredictability can be mitigated using historical data

Cash flows can be limited by managerial discretion: Spending authority limits, Internal budget restrictions, External restrictions, e.g., salary dollars for salary

only Tolerance boundaries.

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Some items are spent all at once, e.g. transfers or major capital purchases.

Are there any other rules of the game set in place by the organization: Informal reserves and hold-backs Reporting frequency Degree of detail Contingency funds – formal and informal Budget conditions Limitations on managerial flexibility

End result: Managers Expenditure Plan

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Factors to take into account in building a Factors to take into account in building a cash flow plancash flow plan

Previous patterns of inflow in past year, e.g. for an NGO: donations tend to peak during major fund-raising events with regularity, major government funding tends to flow two times a year provided the grants is approved in advance

Anticipation of any changes that might cause such a flow to alter, e.g. the organization decides that it will change its fund-raising campaign to a different type and a different time, a major donor adjusts some criteria and is reviewing its procedures which may create delays.

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Factors to take into account in building a Factors to take into account in building a cash flow plancash flow plan

Timing of the maturity of investments or endowments in various funds;.

Awareness of the timing of cash requirements to match them up with inflows, e.g. major capital expenses are anticipated for the summer, thereby necessitating a cash outflow demand surge in late summer; this will not help anticipate inflows, but will inform and condition the risks and urgencies around the first two elements.

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Expenditure Plans of Organization: budget, program

Financial Performance Reports

Manager’s Expenditure

Plan

The Financial Analysis ProcessThe Financial Analysis Process

Whenever possible gets comparative data: - for the organization over time, - for the organization's peers, and - for benchmarking organizations (if they

exist).

Organize the information and complete the analysis.

Will compare financial performance to the Manager’s Expenditures Plan – often input into organizational financial system

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Analyzing ExpendituresAnalyzing Expenditures

Estimating the timing of expenditures is critical for cash flow purposes

Dividing the budgeted amount by 12 months is not a good strategy

As the fiscal year progresses, analyze projected spending amounts.

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Use the projected budget as a basis for the cash flow

Make sure all reductions or increases are accounted for in the cash projection

For example, if spending freezes have been enacted, have the anticipated savings been accounted for in the cash flow projection?

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Analyze expenditure patterns

Salaries and benefits are usually the largest expenditures

Getting the timing right is key to managing cash flow

Are there months that have additional payments, costs or less demand?

Review the timing of other payments.

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How are materials and supplies purchased? Just-in-time purchasing throughout the year? Ordered in bulk at various points during the fiscal year?

Don’t forget about the impact of restricted funds. These can require significant cash outlays at the start of the fiscal year

Having an annual purchasing cutoff date helps when closing the books But it also can create a big stack of bills that have to be paid at the same time.

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As cash flexibility decreases, priorities will need to be set in order to determine what gets paid first.

Salaries and benefits have specific statutory timelines for payment

That leaves vendor payments for providing flexibility. Maximizing the use of the billing cycle will become important. In extreme cases, vendors may need to be asked to accept a delay in payments – depends on contractual obligations.

Prepare a contingency plan for cash shortages

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Looking for Problem Areas and Identifying Variances: Looking for Problem Areas and Identifying Variances: The uses of historical dataThe uses of historical data

Why it is important?

Developing comparisons year to year

Understanding what has changed and what remains the same

Developing useful variance reporting based on historical data

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Focus on Trend Information and Explaining It

“Overall, the value of new construction in the City for the first three months of the year is 28% more than the same time period last year. The overall increase is due to the new RCMP E-Division Headquarters building.” – City of Surry Quarterly Financial Report, May, 2011

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All Overtime Hours Used by Month by Fiscal Year

-

15,000

30,000

45,000

60,000

APR MAY JUN JUL AUG SEP OCT NOV DEC JAN FEB MAR

Month

All

Ove

rtim

e H

ours

Use

d

2001/02

2000/01

1999/00

1998/99

1997/98

1996/97

1995/96

An Example of the Use of Historical DataAn Example of the Use of Historical Data

Sometime historical data in non-Sometime historical data in non-monetarymonetary

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Table 3: Shelter Admissions

05

10152025303540

J F M A M J J A S O N D

Month

Ad

mis

sio

ns

2002

2003

2004

Analyzing Encumbrances and CommitmentsAnalyzing Encumbrances and Commitments

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Key tool in governments to ensure that budgets do not go over approved limits

“Financial commitments are obligations to outside organizations or individuals that become liabilities if and when terms of exiting contracts, agreement or legislation are met.” – CICA

Will generally not be in your financial reports, but rather in your forward spending plans

For cash forecasting, commitments may not be formal entries but rather managerial statements of intention that certain funds will be fully spent for their intended purpose even though they do not appear as either formal commitments in a cash balance sheet or liabilities in an accrual based balance sheet

Analyzing Encumbrances and CommitmentsAnalyzing Encumbrances and Commitments

Positive uses: inform management of actual flexibility and spending plans

Negative use: protect funds

Danger of unspent funds at the end of the year

Committed amounts reduce the balance available for expenditure in the remaining portion of the year and must be brought into the calculation of any projection.

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Developing a Spending Plan/ForecastDeveloping a Spending Plan/Forecast

Level of detail should reflect need for information, risk, materiality and timeliness, e.g. once a month, once quarterly

Managers should be able to project cash flows over the year

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Developing a Spending Plan/ForecastDeveloping a Spending Plan/Forecast

Dividing by 12 hardly useful or generally not realistic – forecast should reflect the ebbs and flows of expenditure patterns

Block or grant expenditures tends to be all at once

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Quality of Forecasting and Quality of Forecasting and DataData

Key to provide financial information derived from current information, known changes and trends and announcement

Comparison of data from current year to prior years always useful

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Translating and Interpreting DataTranslating and Interpreting Data

Usefulness of different perspectives Budget managers Financial advisor Organizational head Corporate financial advisor

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Translating and Interpreting DataTranslating and Interpreting Data

Role of the challenge function

Reporting that makes data relevant to managers and to decision makers: management’s discussion and analysis (MD&As)

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Compare and Contrast

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Management Discussion and AnalysisManagement Discussion and Analysis

Should provide basis for discussion and decision making

Language should be business-oriented and not excessively detailed

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Management Discussion and AnalysisManagement Discussion and Analysis

Objective and easily readable analysis of financial activities based on currently know facts, decisions or conditions

Projections are an essential part of cash forecasting, but should be fact based whenever possible

Otherwise projections should be subject to a variety of opinions to test the hypotheses they contain

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Questions the Management Report must Questions the Management Report must answer…..answer…..

Are we going to be within our budget allotments?

Are we operating according to our budget plan?

How does our performance compare with relevant historical data?

Does this performance mean that more funds may be necessary or that some funds may become surplus in this area and available for reallocation?

What are the variances and why have they occurred?

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Questions the Management Report must Questions the Management Report must answer…..answer…..

What is the responsibility centre manager going to do about the negative variances?

Are positive variances within a retention range for the local manager or are they available for other needs outside the unit but within the organization?

Do we have the needs and authorities to reallocate these funds?

What does this information tell us about the performance of the manager in this unit?

What does this information tell us about the long-term funding?

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Reporting and Discussing Risk in Cash Reporting and Discussing Risk in Cash ManagementManagement

Need to distinguish between short-term and long-term risk

Risk is a key element in determining to change budget allocations either temporarily or permanently

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Reporting and Discussing Risk in Cash Reporting and Discussing Risk in Cash ManagementManagement

Key risk in cash management is over-expenditure of budget or failure to fully use funds available and needed

Other types of risk to consider: Inappropriate use of funds Surges or declines in demand leading to cost over-

runs or under-usage Emerging and unanticipated issues: mad cow,

SARS, BP

Financial reports should not originate the organization’s development of risk but should reflect its overall management process,

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Risk of over-expending is sometimes graphic Risk of over-expending is sometimes graphic and clear……….and clear……….

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STAFFING: BUDGET VERSUS ACTUAL

180

190

200

210

220

230

240

250

JUNE OCT DEC MARCH YEAREND

PLAN

ACTUAL

Understanding and Communicating Cash Flow Patterns

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Cash Forecast ReportCash Forecast Report

Can take many forms: briefing notes, PowerPoint presentation, charts, graphs

Should have some predictability in format and language

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Some analytical information that is important: Historical comparisons The cost of the variance to date, i.e. how

much of the actual budget has been spent The projected variance should nothing

change, i.e. the straight line projection The variance in comparison to similar

units in the system

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Additional components of the report that set managerial context: What caused the gap between expectations

and results, e.g. fewer retirements or transfers than required?

Workload determinants that changed in actual performance, e.g. inmate population increases and opening of an old unit for an emergency

Inefficiencies that remain, e.g. excessive posts.

Limitations of the budget itself Actions that could be taken to correct the

situation.

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Should be a regular submission to the senior management committee of the organization

Should move financial information, various background information, etc into the realm of text, ideas and integration

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Generally the role of finance to prepare but not the role of finance to address: operational managers, responsibility centre heads, their bosses are key to this

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It cannot cover all data – only relevant information: Exceptional performance issues Issues that the senior management wants

to keep a close eye on Highly political or contentious issues Separate funds Areas of operational vulnerability or poor

performance

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Questions to ask about variance: What does the trend look like: is it in the right

direction? If so, can we tolerate the slower pace?

Is this isolated to this unit or a general phenomenon?

Did we set realistic targets? Can we fund the shortfall that we see

emerging? Is this manger delivering and, if not, is this

enough to force us to take some action like removing him and finding some else.

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Should be a consensual document or at least focused on key decisions that CFO wants to receive or see made

Should be devoid of surprise for all players

Role of the top manager: Deputy or organizational head: steering towards decisions, reconciling differences

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86Salaries Operating Grants

Original Budget 2,000,000 3,500,000 1,000,000

Adjusted Budget 2,225,000 3,000,000 1,000,000

Planned Expenditures to date

1,250,000 1,500,000 750,000

Actual Expenditures

1,110,000 1,800,000 600,000

Variance from Plan

140,000 (300,000) 150,000

But this is not enough…….

Need to project to year-end

Need to identify end-of-year overages and underages

Or, have to project to balance the budget

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88Salaries Operating Grants

Original Budget 2,000,000 3,500,000 1,000,000

Adjusted Budget 2,225,000 3,000,000 1,000,000

Planned Expenditures to date

1,250,000 1,500,000 750,000

Actual Expenditures

1,110,000 1,800,000 600,000

Variance from Plan

140,000 (300,000) 150,000

Commitments 200,000 150,000

Projected Expenditures Year End

2,150,000 3,200,000 900,000

Projected Variance at Year End

75,000 (200,000) 100,000

Sure Signs that there will be Sure Signs that there will be troubletrouble

Governance flaws – poor oversight of spending. No managerial review unless there is a problem.

Absence of communication with operational front-end of the organization in budgeting and monitoring..

Lack of interagency cooperation.

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Failure to maintain reserves.

Insufficient consideration of long-term collective bargaining agreement and human resource policy effects.

Flawed multiyear projections.

Inaccurate revenue and expenditure estimations.

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No integration of position control with payroll costing.

Limited access to timely personnel, payroll, and budget control data and reports.

Escalating reliance general fund or reserve encroachment to fund regular programming.

Lack of regular monitoring. . Poor cash flow analysis and reconciliation.

Failure to recognize year-to-year trends.

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Some Solutions for Serious Cash Some Solutions for Serious Cash Management ProblemsManagement Problems

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Panic!

Some Serious Solutions for Serious Cash Some Serious Solutions for Serious Cash Management ProblemsManagement Problems

Prepare your story and a plan: read The Cash Management Games People Play

Find ways to slow down spending where there is discretion

Review commitments (both formal and informal) to determine flexibility to shut down or slow down

Reduce staff where this will work quickly and without further costs, e.g. severance

Not filling positions

Slowing down staffing

Delay orders, put them off until the next period or year

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Some Serious Solutions for Serious Cash Some Serious Solutions for Serious Cash Management ProblemsManagement Problems

Slow down programs/ eliminate services

Beg or borrow from others within the department: avoid mortgaging your future if you can

Seek temporary relief from your boss, the organization as a whole

Seek out contingency funds, if they exist

Examine possible use of non-restricted funds

Seek a change in budget if it can be justified

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Setting the Rules for Distribution and Redistribution of Setting the Rules for Distribution and Redistribution of Surpluses, Carry-Forwards etcSurpluses, Carry-Forwards etc

Huge tension between protecting your own resources and making a corporate contribution: affects information flow for senior management

Important to understand how financial and performance information may be used

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Danger of surprise in rules change – unless subject to extraordinary situations

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Danger in awarding bad management: coming to the rescue is one

thing but doing it several years running simply creates new rules

That reward bad behaviour.


Example of reporting surpluses that financial analysis does not disclose: is it kept in the responsibility centre or does the organization have a ‘wish list’ or ‘critical needs list’ that distributes available funds to the list with no hold back in the responsibility centre – impacts human behaviour significantly

Issue of the use of the carry-forward provisions: is that rolled up corporately and used for other purposes or is it retained within the responsibility centre: has an impact on high level flexibilities

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98

Ende

Fin

Lopussa

Koniec

Final

Sionunda

Documents

In-Year Budget Control and Management Andrew Graham Queens University School of Policy Studies MPA 827 2015